Question

question 4 of 5
tina sells a candy bar of $1.05 which includes 8% sales tax. she buys the candy for $0.75 and needs to make a $0.30 profit. is her current price point enough and why?
no, because she needs to pay payroll taxes
yes, because $0.75 + $0.30 = $1.05
no, because while $0.75 + $0.30 = $1.05, 8% sales tax means tina has to send $.08 for each candy bar to the state
yes, because $1.08 is the maximum legal price for candy

Explanation:

Step1: Calculate the cost + profit

The cost of the candy is $0.75$ and the required profit is $0.30$. So the sum is $0.75 + 0.30=1.05$. But this does not account for the sales - tax that Tina has to remit.

Step2: Analyze the sales - tax component

The selling price of $1.05$ includes an $8\%$ sales - tax. Let the pre - tax price be $x$. Then $x(1 + 0.08)=1.05$, so $x=\frac{1.05}{1.08}\approx0.9722$. The amount of sales - tax is $1.05- \frac{1.05}{1.08}=1.05\times(1-\frac{1}{1.08})=1.05\times\frac{0.08}{1.08}\approx0.0778\approx0.08$. Tina has to send this tax amount to the state. So her actual revenue from the sale (after tax) is approximately $1.05 - 0.08 = 0.97$, while her cost + profit target is $0.75+0.30 = 1.05$.

Answer:

C. No, because while $0.75 + $0.30=$1.05, 8% sales tax means Tina has to send $.08 for each candy bar to the state