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Question

# A manufacturer marks an article at Rs. 5,000. He sells this 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%, calculate the amount of VAT paid by:(i) The wholesaler (ii) The retailer

A
(i)Rs.50 (ii)Rs.40
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B
(i)Rs.40 (ii)Rs.60
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C
(i)Rs.30 (ii)Rs.70
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D
(i)Rs.20 (ii)Rs.40
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Solution

## The correct option is B (i)Rs.40 (ii)Rs.60Mark price =Rs.5000Manufacture sell the article to the wholesaler at a discount of =25%Price of the article after discount=5000−25100×5000⇒5000−1250=Rs.3750Rate of sales tax=8%∴Tax paid by the wholesaler=8% of 3750⇒8100×3750=Rs.300Wholesaler sell the article to retailer at a discount of 15% on M.Pprice of the article after discount=5000−15100×5000⇒5000−750=Rs.4250Rate of sales tax =8%∴Tax paid by the retailer=8% of Rs.4250.⇒8100×4250=Rs.340(i)VAT paid by the wholesalerVAT=tax paid by the retailer-tax paid by the wholesalerVAT=340−300=Rs.40(ii)VAT paid by the RetailerRetailer sell the article at marked price at rate of sales tax=8%∴Tax earned by the retailer=8% of 5000⇒8100×5000=Rs.400VAT=Tax earned by the retailer-Tax paid by the retailerVAT=400−340=Rs.60

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