Problem Solving

In country X a returning tourist must pay 8 percent tax applied to the first $500 or less worth of imported goods. If the total value is in excess of $500 he must pay an additional 15 percent tax on the portion of the total value in excess of 500. What tax must be paid by a returning tourist who imports good with a total value of $720?

A. $33
B. $70
C. $73
D. $92.60
E. $108

The OA is C.

We can solve this PS question as follows,

(0.08)500 + 0.15(720 - 500) = tax paid

40 + 0.15(220) = tax paid

40 + 33 = tax paid

73 = tax paid

Hence, C is the correct answer.

Its mentioned 8% tax applied to the first $500 or less and additional 15% tax on the portion of the total value in excess of 500.

720 = 500 + 220

So 8% of first 500 = $40
15% of above 500 i.e; 220 = $33

40 + 33 = $73. Option C.

Regards!