A newly-opened retail store made $400 profit on the initial

Hi All,

We're told that a newly-opened retail store made $400 profit on the initial expenditure of $25000, and then made $1200 profit on the next $80000 expenditure. We're asked for the approximate percentage change in the ratio of profit to expenditure change from the first $25000 expenditure to the next $80000 expenditure. This question requires the use of the Percentage Change Formula - and you will likely find it helpful to rewrite the given values as individual percentages (instead of fractions).

Percentage Change = (New - Old)/(Old) = Difference/Original

The ratio of the original profit-to-expenditure = 400/25000 = 4/250
The ratio of the second profit-to-expenditure = 1200/80000 = 12/800

We can rewrite those fractions as percents...
4/250 = 16/1000 = 1.6%
12/800 = 1.5/100 = 1.5%

Thus, there was clearly a decrease (from 1.6% to 1.5%). Using the Percentage Change Formula, we have...

(1.6 - 1.5)/(1.6) = 0.1/1.6 = 1/16 = a 6 1/4% decrease.

Final Answer: B

GMAT assassins aren't born, they're made,
Rich