Hi lheiannie07,

We're told that 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. We're asked for the merchant's gross profit on this sale. Here's how you can use a bit of Algebra to answer this question:

To start, we need to determine the original selling price. The original markup equals 25% of the selling price...

Purchase Price + Markup = Selling Price
$60 + .25X = X
$60 = .75X
$60 = (3/4)X
($60)(4/3) = X
$240/3 = $80 = X

Thus, the original sell price = $80. Reducing that price by 20% gives us...

$80 - (.2)($80) = 80 - 16 = $64

Sine the discounted sale price is $64, the merchant's gross profit was $64 - $60 = $4.

Final Answer: C

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