Explain the Code

Alten's client is a mid-size retailer. As part of a code walkthrough round, you're shown a pricing helper from their order service and asked to explain it.

import java.util.List;

public class OrderPricing {

    public double calculateTotal(List<LineItem> items, String customerTier) {
        double subtotal = 0;
        for (LineItem item : items) {
            subtotal += item.getPrice() * item.getQuantity();
        }

        double discountRate = getDiscountRate(customerTier, subtotal);
        double discounted = subtotal - (subtotal * discountRate);

        double tax = discounted * 0.08;
        return discounted + tax;
    }

    private double getDiscountRate(String tier, double subtotal) {
        double rate = 0.0;
        if ("gold".equalsIgnoreCase(tier)) {
            rate = 0.10;
        } else if ("silver".equalsIgnoreCase(tier)) {
            rate = 0.05;
        }

        if (subtotal > 500) {
            rate += 0.03;
        }

        return Math.min(rate, 0.20);
    }
}

Walk through exactly what this code does, step by step, and flag anything you'd want to double-check or clean up if it were going into production.