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Need help in solving Tax Problem

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by sanalnnair » Fri Sep 10, 2010 12:26 am
Hi, Please help me to solve this question.. The wording of this question is making me confused..

Source- Previous GMAT question


When Leo imported a certain item, he made a 7 percent import tax o n the portion of the
total value of the item in excess of $1,000. If the amount of the import tax that Leo paid
was $87.50, what was the total value of the item?

A. $1,600
B. $1,850
C. $2,250
D. $2,400
E. $2,750


The answer given is C. 2,250$
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by kmittal82 » Fri Sep 10, 2010 12:44 am
The question should replace the words "made a 7 percent import tax" to "paid a 7 percent import tax"

Let the value of the imported item = x

x-1000 is then the value on which he paid tax, which was 7%

(7/100)(x-1000) = 87.50

Solve to get x =2,250
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by sanju09 » Fri Sep 10, 2010 1:44 am
sanalnnair wrote:Hi, Please help me to solve this question.. The wording of this question is making me confused..

Source- Previous GMAT question


When Leo imported a certain item, he made a 7 percent import tax o n the portion of the
total value of the item in excess of $1,000. If the amount of the import tax that Leo paid
was $87.50, what was the total value of the item?

A. $1,600
B. $1,850
C. $2,250
D. $2,400
E. $2,750


The answer given is [spoiler]C. 2,250$[/spoiler]

If $x is the total value of the item, then the 7 percent import tax will be levied on $(x - 1000) only, that way

0.07 × $(x - 1000) = $87.50

or x - 1000 = 8750/7 = 1250

or x = [spoiler]$2250

C[/spoiler]
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by tpr-becky » Fri Sep 10, 2010 10:47 am
So the price of the item minus $1000 times 7% is 87.50 or if we put that in math language:

(p-1000)(7/100)=82.50
= (p-1000)(7)=8250
= 7p - 7000 = 8250
= 7p= 15250
= p = 2250.
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by Scott@TargetTestPrep » Tue May 19, 2015 10:11 am
sanalnnair wrote:Hi, Please help me to solve this question.. The wording of this question is making me confused..

Source- Previous GMAT question


When Leo imported a certain item, he made a 7 percent import tax o n the portion of the
total value of the item in excess of $1,000. If the amount of the import tax that Leo paid
was $87.50, what was the total value of the item?

A. $1,600
B. $1,850
C. $2,250
D. $2,400
E. $2,750


The answer given is C. 2,250$
Solution:

Although this problem seems challenging it is actually a simple word translation.

We know that when Leo imports a certain item he pays a 7% import tax on the portion of the total value IN EXCESS OF $1,000. "In excess of" is the key phrase here, and it means that Leo does not pay any tax on his items until he hits $1,000. The best way to complete this problem is to set up an equation.

First, let's say that T = total value of the item, and, therefore, (T - 1000) is the portion that is taxable.

Next, we can create an equation to determine T:

87.5 = 0.07(T - 1,000)

87.5 = 0.07T - 70

157.5 = 0.07T

157.5/0.07 = T

15,750/7 = T

T = 2,250

The answer is C

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