Question

A manufacturer marks an article at Rs. 5000. He sells the article to a wholesaler at a discount of 25% on the marked price and the wholesaler sells it to a retailer at a discount of 15% on its marked price. If the retailer sells the article without any discount and at each stage, the sales tax is 8%, then the amount of VAT paid by wholesaler and retailer are :

• A. Rs. 80, Rs. 60 respectively
  
• B. Rs. 40, Rs. 60 respectively
  
• C. Rs. 80, Rs. 40 respectively
  
• D. Rs. 20, Rs. 60 respectively

Answer 1

The correct option is B

Rs. 40, Rs. 60 respectively

Manufacturer sells the article at a discount of 25%
So, C.P for wholesaler is equal to
Rs. 5000 - 25% of Rs. 5000
For wholesaler
$C.P=Rs.5000-\frac{25}{100}\times 5000$
$=\frac{75}{100}\times 5000=Rs.3750$
Tax paid = 8% of Rs. 3750
$=\frac{8}{100}\times Rs.3750=Rs.300$
Since wholesaler sells it at 15% discount
S.P = Rs. 5000 - 15% of Rs. 5000
S.P = $Rs.5000-\frac{15}{100}\times Rs.5000$
S.P = $\frac{85}{100}\times Rs.5000=Rs.4250$
Tax charged = 8% of Rs. 4250
$=\frac{8}{100}\times 4250=Rs.340$
VAT by wholesaler= Tax charged - Tax paid
=Rs. 340 - Rs. 300
=Rs. 40
For retailer,
C.P = Rs. 4250 [C.P retailer= S.P wholesaler]
Tax paid = 8% of Rs. 4250
$=\frac{8}{100}\times Rs.4250=Rs.340$
S.P = Rs. 5000 [as no discount is given by retailer]
Tax charged= 8% of Rs. 5000
$=\frac{8}{100}\times Rs.5000=Rs.4000$
VAT paid by retailer = Tax charged - Tax paid
= Rs. 400 - Rs. 340
= Rs. 60