When Leo imported a certain item, he paid a 7 percent import tax on 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
OA C
Source: Official Guide
When Leo imported a certain item, he paid a 7 percent import
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Here's a step-by-step algebraic solution.BTGmoderatorDC wrote:When Leo imported a certain item, he paid a 7 percent import tax on 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
Let T = the TOTAL value of the item.
Leo paid a 7% import tax on the portion of the total value of the item in EXCESS of $1000
So, Leo pays tax on the amount that's GREATER then $1000
So, Leo pays 7% tax on (T - 1000)
We can write: import tax = 7% of (T - 1000)
The amount of the import tax that Leo paid was $87.50
So, we write: $87.50 = 7% of (T - 1000)
Or: $87.50 = 0.07(T - 1000)
Expand to get: 87.50 = 0.07T - 70
Add 70 to both sides to get: 157.5 = 0.07T
NOTE: At this point, you might just plug in the answer choices to see which one makes the above equation true.
Or....
Divide both sides by 0.07 to get: 157.5/0.07 = T
Solve: 2250 = T
Answer: C
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Hi All,
You can approach this question by TESTing THE ANSWERS. Instead of setting this up algebraically, you can use the 'spread' of the answer choices to your advantage.
Here, if the total value of the item were $2,000, then the tax would only apply to the amount over $1,000....
$1,000 x .07 = $70.
Since the tax is supposed to be $87.50, we know that the answer has to be GREATER than $2,000.
Eliminate Answers A and B.
Let's TEST Answer D: $2,400.
$1,400 x .07 = $98
This is TOO MUCH, so Answer D is too big. There's only one answer that makes sense...
Final Answer: C
GMAT assassins aren't born, they're made,
Rich
You can approach this question by TESTing THE ANSWERS. Instead of setting this up algebraically, you can use the 'spread' of the answer choices to your advantage.
Here, if the total value of the item were $2,000, then the tax would only apply to the amount over $1,000....
$1,000 x .07 = $70.
Since the tax is supposed to be $87.50, we know that the answer has to be GREATER than $2,000.
Eliminate Answers A and B.
Let's TEST Answer D: $2,400.
$1,400 x .07 = $98
This is TOO MUCH, so Answer D is too big. There's only one answer that makes sense...
Final Answer: C
GMAT assassins aren't born, they're made,
Rich
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We know that when Leo imported the item, he paid 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 did not pay any tax on his items until he hit $1,000. The best way to complete this problem is to set up an equation.BTGmoderatorDC wrote:When Leo imported a certain item, he paid a 7 percent import tax on 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
OA C
Source: Official Guide
First, let's say that T = total value of the item; 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
Alternate Solution:
Let's let x = the portion of the item's value on which he paid 7% tax. Thus, we have:
0.7x = 87.5
x = 1250
The taxable portion of the item was $1250, and the non-taxable portion was $1000. Therefore, the total value of the item is 1250 + 1000 = $2250.
Answer: C
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