Yorkshirepost..the Fiendish Wine Quiz

[spevick]

Excise duty is £2.23 per bottle,VAT is 20%,retailers gross margin is 25% and other costs such as packaging and transport add 56p to the cost of each bottle.
How much is the wine worth in:
£5 bottle
£10 bottle
£20 bottle
Many thanks in advance for any help..

[IJKLM]

Does this work:
for a £5 bottle, subtract VAT: £4
Subtract gross margin of 25% (£1): £3
Subtract shipping: £2.44
Subtract excise duty of £2.23: leaves 21p for the wine.

For a £10 bottle, do the same: £3.21 for the wine

For a £20 bottle it comes to £9.21 for the wine.

[JJ109]

IJKLM, I think there is an error in your first step
If Vat is 20%
the vat element is 1/5 of the net price

On a 5 pound bottle vat = 20/120 * 5.00 = 83.33p
Therefore net price = 4.17
(20% x 4.17 = 83p)
Total 4.17 + 83 = 5.00 pound bottle of wine

[JJ109]

^^ 4.17
Deduct 25% margin - once again this is 25% of the cost to store price
4.17 x 25/125 = 83.4p
4.17 - 83p = 3.34
3.34 - 0.56 costs per bottle = 2.78
2.78 - 2.23 duty = 0.55
55p wine per 5 pound bottle

Use the same pattern for the other two bottles

[spevick]

I appreciate your workings BUt I don't understNd how shipping is £2.44 when it says costs such as packaging and transport add 56p to the cost of each bottle.
ALSO JJ109..how would I work out the £10 and £20 bottle please... I am totally confused...

[JJ109]

Spevick
10 pound bottle

10 x 20/120 = vat = 1.67
Net price = 10 - 1.67 = 8.33

8.33 x 25/125 = retailers margin = 1.67
8.33 - 1.67 = 6.66

6.66 - 56p transport = 6.10
6.10 - 2.23 duty = 3.87
Answer 3.87

20 pound bottle

20 x 20/120 = vat = 3.33
Net price = 20 - 3.33 = 16.67

16.67 x 25/125 = retailers margin = 3.33
16.67 - 3.33 = 13.34

13.34 - 56p transport = 12.78
12.78 - 2.23 duty = 10.55
Answer 10.55

I think!

[spevick]

JJ109..that is unbelievable and I bow to your knowledge..sorry to be a pain but I don't understand why the gross margin profit is 25% and you have written it as 25/125 which makes it one fifth and not a quarter!Totally confused....But you have really walked me through it very clearly apart from that.

[ubasses]

the price of the wine is 100% + 25% margin, hence JJ109's calculation

[JJ109]

Let z = the price of the good before tax
Therefore the tax = 20% x z
The price of the good after VAT is added is 5 pounds (given in the question)

Therefore The good + the tax = 5 pounds, or
Z + 20% Z = 5 pounds
20% is another way of saying 1/5
Therefore z + 1/5 z = 5 pounds
6/5 z = 5 pounds
z = 5 pounds x 5/6
z = 25/6
z = 4 .1667
z = 4.17 rounding to 2 decimal places

You have to remember VAT is 20% of the price BEFORE the Vat is added. It is not 20% of the final price.

[JJ109]

Same principle Spevick for the retailers 25% margin

Cost to retailer + 25% margin = 4.17
100%Z + 25%Z = 4.17
125%Z = 4.17
Z = 100/125 x 4.17
Tax = the other 25/125 X 4.17

[JJ109]

^^ oops The Margin = the other 25/125

[spevick]

Am totally in awe of your knowledge and clear explanation..many thanks for expertise help..
I will now leave you alone
Wishing you a very happy and healthy New Year!!!

[JJ109]

Happy New Year to you also Spevick. Best wishes

[IJKLM]

oops yes - silly me. Thanks for correcting it :)