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Problem Solving

by RiyaR » Sun Sep 14, 2014 8:08 pm
A merchant purchased a jacket for $60 and then determined a selling price that equalled the purchase price of the jacket plus a markup that was 25 percent of the selling price. During a sale, the merchant discounted the selling price by 20 percent and sold the jacket. What was the merchant's gross profit on this sale?
(A) $0
(B) $3
(C) $4
(D) $12
(E) $15
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by GMATinsight » Sun Sep 14, 2014 8:43 pm
RiyaR wrote:A merchant purchased a jacket for $60 and then determined a selling price that equalled the purchase price of the jacket plus a markup that was 25 percent of the selling price. During a sale, the merchant discounted the selling price by 20 percent and sold the jacket. What was the merchant's gross profit on this sale?
(A) $0
(B) $3
(C) $4
(D) $12
(E) $15
Purchase price + 25% selling price= 100% selling price
60+ 25% SP= 100% SP
60= 75% SP

So 100 % SP =80

now 20 % sale means 20 % of 80 = 16
so he sold the jacket at 80-16 = 64 $
total profit = 64-60 = 4 $

Answer: Option C
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by [email protected] » Sun Sep 14, 2014 10:16 pm
Hi RiyaR,

This question is essentially just a "math" question. How you set up the math (and work through the steps) is up to you though (you can use fractions, decimals or percents):

Purchase price = $60
Selling price = $60 + 25% of the Final Price
Final Price = X

$60 + .25X = X
$60 = .75X
$60 = (3/4)(X)

Now, multiply both sides by 4/3
$60(4/3) = (4/3)(3/4)X
$240/3 = (12/12)X
$80 = X

During the sale, the selling price was discounted by 20%

$80 - 20%($80) = Final Selling Price
$80 - 1/5($80) =
$80 - $16 =
$64

The Gross Profit = Final Price - Purchase Price
$64 - $60 = $4

Final Answer: C

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