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GMAT PREP I INCOME TAX / ANNUAL INCOME

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Master | Next Rank: 500 Posts
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by pkw209 » Tue Jan 05, 2010 10:26 am
Hi all,

Unsure of how to solve this one. A brief explanation would be appreciated. Thanks!

FYI, I took this from Zuleron's list of gmat prep questions. The answer is C. I am aware that answers A and E are the same but this is how they are listed in the doc.

124) Before being simplified, the instructions for computing the income tax in Country K were to add 2% of annual income to average of 100 units of Country K’s currency and 1% of annual income. Which represents the simplified formula for computing income tax for a person with an annual income I?

a. 50 + I/200
b. 50 + 3I/100
c. 50 + I/40
d. 50 + I/50
e. 50 + 3I/100
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by ace_gre » Tue Jan 05, 2010 10:57 am
Here the key is to understand the question stem, which is worded some what difficult.

Income tax = (2/100) *I + {100+ (1/100) *I}/2
==> (2I/100)+ 50+ (I/200)
==> 5I/200 + 50
==> I/40 + 50

Answer is C
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by pkw209 » Wed Jan 06, 2010 2:20 pm
You're good Ace, really good. I've noticed that you've been answering a lot of my questions so thanks.

My question is how did you determine to divide the second portion by two? Understand that's the average but why 2 and not 3 or 4, etc.? Is it because you're adding currency and annual income?
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by ace_gre » Wed Jan 06, 2010 3:24 pm
Yes. You are correct. Divide by 2 because it's the average of two numbers.

Keep the questions coming! We are all learning! :-)
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