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formula for income taxes

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formula for income taxes

by nailyad » Sat Dec 26, 2009 5:55 pm
Before being simplified, the instructions for computing income tax on country R were to add 2% of one's annual income to the average of 100 units of country R's currency and 1% of one's annual income. Which of the following represents the formula for computing the income tax, in country R's currency, for the person in that country whose annual income is I.

1. 50+I/200

2.50+3I/100

3. 50+ I/40

4. 100+I/50

5. 100+ 3I/100
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by Stuart@KaplanGMAT » Sat Dec 26, 2009 6:40 pm
nailyad wrote:Before being simplified, the instructions for computing income tax on country R were to add 2% of one's annual income to the average of 100 units of country R's currency and 1% of one's annual income. Which of the following represents the formula for computing the income tax, in country R's currency, for the person in that country whose annual income is I.
Because the answer choices have fractions, let's use fractions instead of %s in our calculations.

So, the first part of your tax is:

(2/100)I or I/50

The second part of your tax is the average of 100 and (1/100)I.

Average = sum of terms / # of terms

Average = (100 + I/100)/2 = 100/2 + I/200 = 50 + I/200

Adding the two parts together:

I/50 + 50 + I/200

= 50 + 4I/200 + I/200

= 50 + 5I/200

= 50 + I/40... choose (3).

* * *

As an aside, please post questions in the correct forum!
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