Study Guide: Tax, Tip, Discount, Markup, Simple Interest

Study Guide Part 1:

Tax, Tip, Discount, Markup, Simple Interest

What is sales tax?

Sales tax is an additional amount of money paid on goods and services purchased.

This money goes to the government.

Step 1: Turn the percent into a decimal

Step 2: Multiply the decimal to the cost of the item

Step 3: (FOR TOTAL) Add the tax to the cost of the item

Multiple Choice

If you purchase a new television for $400 and the sales tax is 7%, how much sales tax would you pay?

• $428

• $28

• $280

• $680

• $26.50

If you purchase a new television for $400 and the sales tax is 7%, how much sales tax would you pay?

 $Step\ 1:\ \ \ \ 7\%\ =0.07$  

 $Step\ 2:\ \ \ \ 0.07\times400\ =28$  
Step 3 is not needed because they only want to know "how much tax" NOT TOTAL

Multiple Choice

Phil bought a new video game. It costs $39.99. The sales tax rate 7.25%. Calculate the total cost with tax.

• $2.90

• 0.0725

• $40.90

• $42.89

Phil bought a new video game. It costs $39.99. The sales tax rate 7.25%. Calculate the total cost with tax.

 $Step\ 1:\ \ \ 7.25\%\ =\ 0.0725$  
 $Step\ 2:\ \ \ 0.0725\times39.99\ =\ \text{2.889}$  
 $Step\ 3:\ \ \ \ 2.90\ +\ 39.99\ =\ 42.89$  


$42.89 is the total cost of the video game with tax.

Multiple Choice

Kara bought a cheeseburger for $12.50. The sales tax rate is 6.75%. What was the sales tax on the cheeseburger.

• 0.0675

• 0.84

• $13.34

• $8.43

Kara bought a cheeseburger for $12.50. The sales tax rate is 6.75%. What was the sales tax on the cheeseburger.

 $Step\ 1:\ \ \ 6.75\%\ =\ 0.0675$  
 $Step\ 2:\ \ \ \ 0.0675\times12.50\ =\ 0.84$  

Step 3 is not needed because they only want to know the sales tax NOT TOTAL.

What is tip?

A tip or gratuity is an amount of money that is given to a worker such as a waiter or waitress who performs a service for you.

This money goes to an employee!

Multiple Choice

You eat out at a restaurant and your bill before tax is $52.60. You decide to leave a 20% tip for the waiter. How much tip should you leave for the waiter?

• $9.52

• $63.12

• $10.52

• $20.12

You eat out at a restaurant and your bill before tax is $52.60. You decide to leave a 20% tip for the waiter. How much tip should you leave for the waiter?

 $Step\ 1:\ \ \ 20\%\ =\ 0.20$  
 $Step\ 2:\ \ \ \ 0.20\times52.60=10.52$  

We do not need to do step 3 because they only want the tip NOT TOTAL

Multiple Choice

You get a haircut for $20. You want to leave a 15% tip. How much tip did you leave?

• $30

• $300.00

• $23.00

• $3.00

• $5.00

You get a haircut for $20. You want to leave a 15% tip. How much tip did you leave?

 $Step\ 1:\ 15\%=\ 0.15$  

 $Step\ 2:\ \ \ \ 0.15\times20\ =\ 3$  

We do not need to do step 3 because they only want tip NOT TOTAL

What is markup?

Markup is the amount added to the original cost.

How much a retailer increases the price over what they paid for it (which is how they make money to pay for all their costs and hopefully make a profit).

"selling price" = total

Multiple Choice

A shoe store marks up merchandise by 8%. What was the selling price of a pair of shoes whose wholesale price is $24.50?

• $1.96

• $2.10

• $28.46

• $26.46

A shoe store marks up merchandise by 8%. What was the selling price of a pair of shoes whose wholesale price is $24.50?

 $Step\ 1:\ \ \ \ \ \ 8\%=0.08$  
 $Step\ 2:\ \ \ 0.08\times24.50=1.96$  
 $Step\ 3:\ \ 1.96+24.50\ =\ 26.46$  

The selling price (What the customer will pay) is $26.46

Multiple Choice

A store buys shampoo for $6. They want to markup the shampoo by 40%. What is the markup?

• $246

• $2.40

• $2.45

• $8.40

• $8.60

A store buys shampoo for $6. They want to markup the shampoo by 40%. What is the markup?

 $Step\ 1:\ \ \ \ 40\%=0.40$  
 $Step\ 2:\ \ \ 0.40\times6=2.40$  
We do not need to do step 3 because they only want the markup (Profit)

What is discount?

Discount is a reduction in price.

A percentage of savings for the customer.

*****SUBTRACTION*****

Multiple Choice

Jerry is buying a tablet. The original price is $79. It is on sale for 10% off. What is the discount?

• $7.90

• $6.90

• $0.79

• $71.10

Jerry is buying a tablet. The original price is $79. It is on sale for 10% off. What is the discount?

 $Step\ 1:\ \ \ \ \ \ 10\%=0.10$  
 $Step\ 2:\ \ \ \ 0.10\times79=7.90$  

We do not need to do step 3. They only want the discount (how much you save) NOT TOTAL

Multiple Choice

You go to the store to buy a video game for $21.99. There is a 40.5% off sale. What is the sales price?

• $8.91

• $13.08

• $32.90

• $7.91

You go to the store to buy a video game for $21.99. There is a 40.5% off sale. What is the sales price

 $Step\ 1:\ \ \ \ 40.5\%=0.405$  
 $Step\ 2:\ \ \ \ 0.405\times21.99=8.91\ -Discount$  
 $Step\ 3:\ \ \ \ \ 21.99-8.91=13.08$  

What is simple interest?

 $Formula:\ \ \ \ \ I=prt$  

Interest is the amount of money charged for borrowing or using money.

 $I=prt$  

• I = interest

• P = principal (MONEY$$$)

• R = Rate (Percent as a decimal)

• T =  Time (years)

Multiple Choice

To buy a car, Danny borrowed $16,000 for 3 years at an annual simple interest rate of 9%. If it takes him 3 full years to pay off the loan, how much interest will he pay?

• $0.09

• $432,000

• $4320

• $43,200

To buy a car, Danny borrowed $16,000 for 3 years at an annual simple interest rate of 9%. If it takes him 3 full years to pay off the loan, how much interest will he pay?

 $i=prt$ 

  $i=16,000\times0.09\times3$  

 $Interest=\text{4320}$  

Multiple Choice

Kale's parents deposited $23,500 into his savings account as a college fund when he was born. How much interest will Keith have in his account after 18 years, at a yearly simple interest rate of 4.75%?

• $20,092.50

• $200,925

• $2,009,250

Kale's parents deposited $23,500 into his savings account as a college fund when he was born. How much interest will Keith have in his account after 18 years, at a yearly simple interest rate of 4.75%?

 $i=prt$  
 $i=23500\times0.0475\times18$  
 $Interest=20,092.50$  

Multiple Choice

A bank offers an annual simple interest rate of 7% on home improvement loans. How much would Terry owe the bank in total if he borrowed $12,000 for 2 years?

• $1,680

• $13,680

• $16,800

A bank offers an annual simple interest rate of 7% on home improvement loans. How much would Terry owe the bank in total if he borrowed $12,000 for 2 years?

 $i=prt$  
 $i=12000\times0.07\times2=1680$  
 $Interest=1680$  
 $TOTAL=1680+12000=13680$  
Terry must pay $13,680