Question

A manufacturer sells a washing machine to a wholesaler for Rs. 20000. The wholesaler sells it to a trader at a profit of Rs. 1500 and the trader, in turn, sells it to a consumer at a profit of Rs. 2000. If the rate of VAT is 8%, the VAT received from manufacturer and wholesaler are:

• A. Rs. 160, Rs. 1200 respectively
  
• B. Rs. 1600, Rs. 120 respectively
  
• C. Rs. 1200, Rs. 160 respectively
  
• D. Rs. 120, Rs. 1600 respectively

Answer 1

The correct option is B

Rs. 1600, Rs. 120 respectively

Manufacturer on selling a washing machine for Rs. 20000 charges a tax of 8%
Tax charged = $\frac{8}{100}\times 20000=Rs.1600$
VAT from manufacturer = Tax charged - Tax paid
= Rs. 1600 - Rs. 0 ( He did not pay any tax)
= Rs. 1600

For wholesaler:
C.P= Rs. 20000

S.P= 20000+Rs. 15000 (as he has to made profit of Rs. 1500)
=Rs. 21500
Tax paid by wholesaler= 8% of Rs. 20000
$=\frac{8}{100}\times 20000$

= Rs. 1600
Tax charged by wholesaler = 8% of Rs. 21500
$=\frac{8}{100}\times 21500$
= Rs. 1720
VAT received from wholesaler :
=Rs. 1720 - Rs. 1600
=Rs. 120