gross profit on a computer game

ska7945 wrote:A toy store�s gross profit on a computer game was 10 percent of the cost of the game. If the store increased the selling price of the game from $44 to $46 and the cost of the game remained the same, then the store�s gross profit on the game after the price increase was what percent of the cost of the game?

A. 10.5%
B. 11%
C. 12.5%
D. 13%
E. 15%

We are given that a toy store’s gross profit on a computer game was 10 percent of the cost of the game. Since we know that revenue - cost = profit and we are given that profit = 0.1 x cost, we can create the following equation, in which r = revenue and c = cost:

r - c = 0.1c

r = 1.1c

Since the original selling price (or revenue) was $44, we can substitute 44 for r in the equation r = 1.1c and determine c.

44 = 1.1c

440 = 11c

40 = c

If the price was increased to $46, the new profit would be 46 - 40 = $6.

Finally we can determine what percent the profit was of the cost.

(profit/cost) x 100%

(6/40) x 100%

(3/20) x 100%

15%

Answer: E

Hi All,

We're told that a toy store's gross profit on a computer game was 10 percent of the cost of the game and the store increased the selling price of the game from $44 to $46 and the cost of the game remained the same. We're asked to find the store's gross profit on the game after the price increase as a percent of the cost of the game. The answer choices to this question are 'spread out' enough that we can use a bit of logic (and a little math) to get to the correct answer.

Since the initial selling price of the game is $44 - and that represents a 10% PROFIT - we know that the COST of the game is LESS than $44. Thus, raising the sell price by $2 will increase the profit by $2.

$2/$44 = 1/22 = about 5% - and since we know that the COST was less than $44, 1/22 would be 'rounding down' (the actual fraction is likely closer to 1/20). Thus, the INCREASE in profit (as a percent of cost) is almost certainly around 5%. There's only one answer that's that much greater than the initial 10% profit we started with...

Final Answer: E

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