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Question

An article is marked at Rs. 500. The wholesaler sells it to a retailer at 20% discount and charges sales-tax on the remaining price at 12.5%. The retailer, in turn, sells the article to a customer at its marked price and charges sales-tax at the same rate. Calculate:

(i) the price paid by the customer

(ii) the amount of VAT paid by the retailer.

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Solution

The correct option is **B** (i) Rs. 562.50 (ii) Rs. 12.50

Marked Price, M.P.=Rs. 500

Discount=20%

∴, Selling price of the article for wholesaler=Rs. (500−20% of 500)

=Rs. (500−20100×500)

=Rs. (500−100)

=Rs. 400

Tax paid by the wholesaler=Rs. 12.5100×400=Rs. 50.0

(i)The price paid by the customer

M.P.=Rs. 500

Sales tax rate =12.5%

Price paid by the customer =Rs. (500+12.5100×500)

=Rs. (500+62.5)

=Rs. 562.50

Tax paid by the customer=Rs. 12.5100×500

=Rs. 62.50

(ii)The amount of the VAT paid by the retailer:

VAT=Tax paid by the customer − Tax paid by the retailer

VAT=Rs. (62.50−50)=Rs. 12.50

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