A shop owner offers the following discount options on an article

A shop owner offers the following discount options on an article to a customer:

  1. Successive discounts of 10% and 20%, and then pay a service tax of 10%.
  2. Successive discounts of 20% and 10%, and then pay a service tax of 10%.
  3. Pay a service tax of 10% first, then successive discounts of 20% and 10%.

Which one of the following is correct?

  1. 1 only is the best option for the customer.
  2. 2 only is the best option for the customer.
  3. 3 only is the best option for the customer.
  4. All the options are equally good for the customer.

Answer: D

Explanation

Let the base price be Rs. 100

Condition 1:

After 1st discount = 100 - (10% × 100) = Rs. 90

After 2nd discount = 90 - (20% × 90) = Rs. 72

After Service tax = 72 + (10% × 72) = Rs. 79.2

Condition 2:

After 1st discount = 100 - (20% × 100) = Rs. 80

After 2nd discount = 80 - (10% × 80) = Rs. 72

After Service tax = 72 + (10% × 72) = Rs. 79.2

Condition 3:

After Service tax = 100 + (10% × 100) = Rs. 110

After 1st discount = 110 - (20% × 110) = Rs. 88

After 2nd discount = 88 - (10% × 88) = Rs. 79.2

All the options are equally good for a customer.

  • Exam Year: 2020