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profit, sales tax

Expert replies
by Asif » Wed Jun 23, 2010 12:56 am
if the sales price of a vehicle is between $15,000 and $20,000 the sales tax is 3% on the sales price
if the sales price of a vehicle is between $20,001 and $25,000 the sales tax is 4% on the sales price

Now a car seller intends to add the sales tax to his invoice so that after deduction of the sales tax the original sales price remains the same and therefore his profit margin remains unchanged. The car seller fixed a car's sales price at $19,500. What would be his invoice price (adding the sales tax) of the car so that after deduction of tax he retains the same profit?

a. 20,085.0
b. 20,280.0
c. 20,312.5
d. 20,103.1
e. 20,403.1
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Source: — Problem Solving |

by albatross86 » Wed Jun 23, 2010 1:19 am
All the choices are >20,001 and hence the sales tax is 4%
We basically need the choice in which when we deduct 4% we get back the original sale price of 19,500$


0.96*x = 19500
=> x = 19500/0.96
= 20312.5

Pick C

The question is worded a bit strangely so I maybe wrong.
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by kvcpk » Wed Jun 23, 2010 2:07 am
Answer should be C.

3 percent of 19500 will take it above 20000. so the tax value changes from 3 to 4.

Task is now to find a value from which 4 percent is deducted, it is equal to 19500.

It means to say that we need to find a value of which 96% equals 19500

0.96x = 19500

so x = 20312.5

C
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by Asif » Wed Jun 23, 2010 2:14 am
Thanks KVCPK: You got the idea. some might mistake with range that falls into 3% tax category. but with the tax included it turns to next slab.
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by kvcpk » Wed Jun 23, 2010 2:36 am
Asif wrote:Thanks KVCPK: You got the idea. some might mistake with range that falls into 3% tax category. but with the tax included it turns to next slab.
Yeah... Easily misleading.. Good question..
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