Question

Judy is working at a retail store over summer break. A customer buys a $50 shirt that is on sale

for 20% off. Judy computes the discount, adds sales tax of 10%, and tells the customer how
much he owes. The customer insists that Judy first add the sales tax and then apply the discount.
He is convinced that this way he will save more money because the discount amount will be
larger.

Answer 1

It does not matter in which order the discount and tax are computed.

Explanation:

Judy first takes 20% off which gives a new price of $50(0.8)=$40. She then adds the 10% sales tax for a final price of $40(1.1)=$44. The customer first adds 10% for a new price of $50(1.1)=$55. He then takes 20% off for a final price of $55(0.8)=$44.

The customer is right to say that the discount amount will be larger, it is $11 opposed to $10 with his method. But the additional $1 just gets subtracted from the tax amount that was added in the first step. So the final price is the same in both cases.

Answer 2

• Same final price, no difference

Explanation:

Way 1, final price

Apply discount and then apply tax

• (50 - 20%) + 10% =
• 50*0.8*1.1 =
• $44

Way 2, final price

Apply tax and then apply discount

• (50 + 10%) - 20% =
• 50*1.1*0.8 =
• $44

As we see both ways reveal same final price so no difference