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 :

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Solution

The correct option is **A**

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.5000−25100×5000

=75100×5000=Rs.3750

Tax paid = 8% of Rs. 3750

=8100×Rs.3750=Rs.300

Since wholesaler sells it at 15% discount

S.P = Rs. 5000 - 15% of Rs. 5000

S.P = Rs.5000−15100×Rs.5000

S.P = 85100×Rs.5000=Rs.4250

Tax charged = 8% of Rs. 4250

=8100×4250=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

=8100×Rs.4250=Rs.340

S.P = Rs. 5000 [as no discount is given by retailer]

Tax charged= 8% of Rs. 5000

=8100×Rs.5000=Rs.4000

VAT paid by retailer = Tax charged - Tax paid

= Rs. 400 - Rs. 340

= Rs. 60

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