If a merchant makes a profit of 20% based on the selling...

BTGmoderatorLU wrote:If a merchant makes a profit of 20% based on the selling price of an article, what percent does the merchant makes on the cost?

A. 20
B. 40
C. 25
D. None of these

We can let R = selling price and C = cost and create the equation:

R - C = 0.2R

0.8R = C

In terms of R, we see that the profit is 0.2R and the cost is 0.8R. Thus the profit as a percent of cost is:

0.2R/0.8R = 0.2/0.8 = 2/8 = 1/4 = 25%

Alternate Solution:

Let’s assume the selling price is $100 and let c = the cost of the item. We know that selling price - cost = profit, or:

100 - c = 100 x 0.2

100 - c = 20

80 = c

Since the cost of the item is $80 and the profit made on its sale is $20, we see that the profit as a percent of cost is 20/80 = 1/4 = 25%.

Answer: C