Marked Price, Discount and VAT

What are Marked Price, Discount, and VAT?

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Marked Price

 

The price which is listed or printed on the item or article for sale is called the marked price or labeled price of the item. It is denoted by MP.

Discount

 

When a shopkeeper reduces a certain amount from the marked price of an article and sells it to the customers, the reduced amount is called a discount. Discount usually is given as a certain percent of the marked price.

 

Thus, 

  

Actual Selling Price (SP)

 

The price of goods after deducting the discount amount from the marked price (MP) is called the actual selling price or SP.

 

Thus, 

SP = MP – Discount amount

VAT (Value Added Tax)

 

VAT (Value Added Tax) is a government tax levied on the cost of certain goods or services. The VAT rate is usually in percent and is decided by the government. The rate of VAT varies from country to country and there are certain goods and services which are free from VAT. For example, educational items, social welfare services, etc. are VAT-free goods and services.

 

VAT is levied on actual selling price SP.

 

Thus, 

SP with VAT

 

The final price of goods after deducting discount amount (which is SP) and adding the VAT amount is called SP with VAT.

 

Thus,

SP with VAT = SP + VAT amount

  

What about CP?

CP is the cost price of the item for the seller (shopkeeper). Then, the shopkeeper marked the price of that item higher than the cost price. So, CP always is less the MP. Therefore, by giving a discount also, a shopkeeper makes a profit in his business. 

Since VAT is the tax paid by the customer to the government. This amount is not calculated for profit or loss.

 

For more details on CP, SP, Profit and Loss and their formula, please go to the article - Profit and Loss!

Formula List 

Here is the list of all formulas on MP, Discount, SP, and VAT.

 

Worked Out Examples

 

Example 1: The marked price of a book is Rs. 200. If a discount of 10% is offered. Find the selling price of the book.

Solution: 

Here,

MP = Rs. 200

Discount = 10%

SP = ?

We know,       

∴ The selling price of the book = Rs. 180.

 

Example 2: The marked price of a computer is Rs. 30000. If it is sold after 20% discount and then 30% VAT is levied on it. Find the price of the computer including VAT.

Solution: 

Here,

MP = Rs. 30000

Discount = 20%

VAT = 13%

SP with VAT = ?

We know,        

∴ The price of the computer including VAT = Rs. 27120.

Example 3: After allowing a 15% discount on the marked price of a radio, 13% VAT is levied, then the cost of the radio becomes Rs. 1997. Find the marked price of the radio.

Solution: 

Here,

SP with VAT = Rs. 1997

Discount = 15%

VAT = 13%

MP = ?

We know,      

∴ The marked price of the radio = Rs. 2080.

Example 4: The marked price of an article is Rs. 5000. After allowing some percent of discount and adding 10% VAT, the article is sold for Rs. 4400. Find the discount percent.

Solution: 

Here,

MP = Rs. 5000

SP with VAT = Rs. 4400

VAT = 10%

Discount % = x% (let)

We know,

∴     Discount percent = 20%

 

Example 5: A machine is sold at Rs. 99000 after 10% discount and 10% VAT on the marked price. Find the discount amount and VAT amount.

Solution: 

Here,

SP with VAT = Rs. 99000

Discount = 10%

VAT = 10%

Discount Amount =?

VAT Amount = ?

∴   The discount amount is Rs. 10000 and VAT amount is Rs. 9000.

Example 6: After allowing a 20% discount on the marked price and then levying 10% VAT, a radio was sold. If the buyer had paid Rs. 320 for VAT, how much was the discount?

Solution: 

Here,

Discount = 20%

VAT = 10%

VAT Amount = Rs. 320

We know, 

VAT Amount = VAT% of SP

∴ Rs. 800 was the discount amount.

Example 7: A shopkeeper allowed a 10% discount on a watch of marked price of Rs. 600. If he got 8% profit, find the cost price of the watch.

Solution: 

Here,

MP = Rs. 600

Discount = 10%

Profit = 8%

CP = ?

∴ The cost price of the watch = Rs. 500.

Example 8: Davish sold a watch at a gain of 20% after allowing a discount of 15%. Had it been sold after allowing a 30% discount, there would have been a loss of Rs. 400. Find the marked price of the watch.

Solution: 

Here,

MP = Rs. x (let)

∴   The marked price of the watch is Rs. 48000

 

Example 9: When an article is sold at a discount of 10% on its marked price, a profit of Rs. 8 is earned by the seller. If the same article is sold without allowing a discount there will be a profit of Rs. 20. What should be the cost price of the article?

Solution: 

Here,

CP = Rs. x (let)

∴  Cost price should be Rs. 100

Example 10: The marked price of an article is 25% above the selling price and the cost price is 20% below the selling price. Find the rate of discount and the profit percentage.

Solution: 

Here,

SP = Rs. x (let)

Marked price is 25% above the selling price,

Again,

Cost price is 20% below the selling price,

∴   Discount = 20% and Profit = 25%.

Do you have any questions regarding marked price, discount and VAT?

You can ask your questions or problems here, in the comment section below.

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