There are three production stages required before a bicycle produced by Masi Bicicletia S.A.can be sold at retail for €4,500.The VAT rate is 15%.Find the total tax liability due.

Question

Quizplus · Accepted Answer

To find the total tax liability, we need to first calculate the price before tax by adding the cost of production for the three stages. Let's assume the cost of production is €3,000.

Price before tax = Cost of production × (1 + Markup percentage) 
Markup percentage = 50% (since the bike is sold for €4,500, which is 50% more than the cost of production)

Price before tax = €3,000 × (1 + 0.5) = €4,500

Now we can calculate the tax liability:

Tax liability = Price before tax × VAT rate = €4,500 × 0.15 = €675

Therefore, the best choice is B, with a tax liability of €675.

There Are Three Production Stages Required Before a Bicycle Produced