jacket

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grandh01: Master | Next Rank: 500 Posts; Posts: 265; Joined: Tue Jul 03, 2012 11:04 pmFollowed by: 6 members

by grandh01 » Mon Aug 06, 2012 5:31 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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Source: Beat The GMAT — Problem Solving | Mon Aug 06, 2012 5:31 pm

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Anurag@Gurome: GMAT Instructor; Posts: 3835; Joined: Fri Apr 02, 2010 10:00 pmFollowed by: 523 members; Location: Milpitas, CA; Thanked: 1854 times; GMAT Score:770

by Anurag@Gurome » Mon Aug 06, 2012 5:39 pm

grandh01 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

Let the mark up be $M.
So, M should be 25% of the selling price 60 + M
M = 0.25 * (60 + M)
M = 15 + 0.25M
M = 20
So, the selling price = $60 + $20 = $80

Now the price of jacket after a discount of 20% will be 80 - (0.20 * 80) = $64
Therefore, gross profit on the sale = final selling price - cost of the jacket = $64 - $60 = [spoiler]$4[/spoiler]

The correct answer is B.

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truplayer256: Master | Next Rank: 500 Posts; Posts: 392; Joined: Thu Jan 15, 2009 12:52 pm; Location: New Jersey; Thanked: 76 times

by truplayer256 » Mon Aug 06, 2012 6:37 pm

Let the selling price be x.

x = 60 + 0.25(x) => 3x/4 = 60 => x = (4/3)(60) = 80

Price of jacket during sale = 80(0.8) (Due to discount) = 64

Gross profit = 64 - 60 = $4

I think Anurag meant C.

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