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Question

A wholesaler buys a TV from the manufacturer for Rs 25,000. He marks the price of the TV 20% above his cost price and sells it to a retailer at a 10% discount on the marked price. If the rate of VAT is 8%, find the :
(i) Marked price
(ii) Retailer's cost price inclusive of tax
(iii) VAT paid by the wholesaler.
[3 MARKS]

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Solution

Each subpart: 1 Mark
Let C.P. of manufacturer be Rs x
VAT = 8%
So, S.P. of manufacturer = Rs 25000
Hence, x+8%of x=25000
x+8x100=25000
108x100=25000
x=25000×100108
x=Rs 23148
Now C.P. of TV for wholesaler Rs 25000
(i) Marked price of TV = Rs25000+20% of 25000
=Rs 25000+Rs25000×20100
=Rs 25000+Rs 5000
= Rs 30000
(ii) C.P. of TV for retailer
=Rs 30000Rs 30000×10%(discount)
= Rs 30000 - Rs 3000
= Rs 27000
Now, C.P. of TV for retailer inclusive of tax
= Rs 27000 +Rs 2700×8%(VAT)
= Rs 27000 + Rs 27000×8100
= Rs 27000 + Rs 2160
= Rs 29160
(iii) VAT paid by the wholesaler = Rs 25000 - Rs 23148
= Rs 1852


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