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Each year, Company X’s local tax burden is computed by charging a set

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Each year, Company X’s local tax burden is computed by charging a set  [#permalink]

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New post 16 Dec 2018, 07:57
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Each year, Company X’s local tax burden is computed by charging a set amount of $200 plus an additional 8 percent on all profit made over $10,000. What is the company’s local tax burden this year?

(1) Company X made a profit of $60,000 this year.

(2) Company X’s local tax burden is equal to 7 percent of its profit this year.
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Re: Each year, Company X’s local tax burden is computed by charging a set  [#permalink]

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New post 16 Dec 2018, 08:29
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cristianosubo wrote:
Each year, Company X’s local tax burden is computed by charging a set amount of $200 plus an additional 8 percent on all profit made over $10,000. What is the company’s local tax burden this year?

(1) Company X made a profit of $60,000 this year.

(2) Company X’s local tax burden is equal to 7 percent of its profit this year.


Given : Tax = $200 + 0.08(Profit - 10000)
1) Profit = 60000; we can directly key in and cal tax , which comes out to be 4200$ suff (No need to calculate )
2) Tax = 0.07 Profit, put this is given equation

0.07P = 200 + 0.08(P -10000) ; P = 60000$ , from This P we can calculate tax as in stat 1) suff

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Re: Each year, Company X’s local tax burden is computed by charging a set  [#permalink]

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New post 19 Dec 2018, 06:05
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Here, in the answer are we are assuming that the profit is always greater than $10,000?
Because, if profit is less than 10000 then the tax burden would come out to be $200.
Thus, we would have 2 solutions using only option (2).

Solutions:

1. If profit>10,000
0.07P = 200 + 0.08(P -10000)
P = $60,000
Tax burden = $4200

2.. If profit<10,000
Tax burden = 0.07P=200
Tax burden = $200

Thus, we have 2 solutions and hence (2) alone is not sufficient
Therefore, answer should be A.
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Each year, Company X’s local tax burden is computed by charging a set  [#permalink]

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New post 20 Dec 2018, 09:39
Shamita wrote:
Here, in the answer are we are assuming that the profit is always greater than $10,000?
Because, if profit is less than 10000 then the tax burden would come out to be $200.
Thus, we would have 2 solutions using only option (2).


I feel the OA is correct. If the profit is less than $10,000, say $5000, then the tax burden will come out to be $200 ---> you are right up till this point. Statement 2 says that tax burden is 7%. BUT $200 is NOT 7% of $5000!!

I hope you get the point I am making here. There is only one unique solution when the effective tax rate is 7%!! No value less than 10000 will satisfy this condition or in simple words only one value of profits will satisfy this condition, that is when the profit is $60,000/-
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Each year, Company X’s local tax burden is computed by charging a set   [#permalink] 20 Dec 2018, 09:39
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