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An income tax is 20% in the lowest bracket of net income and

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Manager
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An income tax is 20% in the lowest bracket of net income and [#permalink]

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New post 20 Mar 2008, 07:06
This topic is locked. If you want to discuss this question please re-post it in the respective forum.

An income tax is 20% in the lowest bracket of net income and 25% on the net income in excess of that bracket. If the tax on $1800 of net income is $385. What is the upper limit of the lowest bracket?
$1050
$1200
$1300
$1380
$1420
Please explain your answer. thanks

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Director
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Re: An income tax [#permalink]

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New post 20 Mar 2008, 07:53
An income tax is 20% in the lowest bracket of net income and 25% on the net income in excess of that bracket. If the tax on $1800 of net income is $385. What is the upper limit of the lowest bracket?

Suppose upto x amount IT rate of 20% is applied and above x rate of 25% is applied.

So we have x*20/100 + (1800-x)*25/100 = 385
=> 0.2x + 450 - 0.25x = 385
=> 0.05x = 65
=> x = 1300

So upto 1300 tax rate is 20% and above it tax rate is 25%.

Answer C.

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SVP
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Re: An income tax [#permalink]

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New post 20 Mar 2008, 19:06
same approach and answer for me as well:

385 = 0.2*x + 0.25*(1800-x) where x is the income

solve for x = 1300

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Manager
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Re: An income tax [#permalink]

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New post 20 Mar 2008, 19:14
How do you guys do calculations like these quickly?

0.05x = 65

Is it via estimation?

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Director
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Re: An income tax [#permalink]

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New post 20 Mar 2008, 19:17
It is pretty simple and you should know tables till 20 to be quick enough in GMAT. Moreover remembering square and cube of first 30 numbers is also helpful.

However to make it simple
0.05x = 65 can be rewritten as x = 65/0.05 = 65*100/5 = 65*20 = 1300

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Re: An income tax   [#permalink] 20 Mar 2008, 19:17
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An income tax is 20% in the lowest bracket of net income and

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