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Percent Question

Problem Solving — algebra and arithmetic (GMAT Focus Edition)
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by milanproda » Tue Dec 21, 2010 6:46 am
A distributor sells a product through an online store, which takes a commission of 20 percent off the price set by the distributor. The distributor obtains the product from a producer at the price of 15 dollar per item. What i the price that the buyer observes online if the distributor wants to maintain a 20 percent profit on the cost of the item?

A-$18.00
B-$18.50
C-$22.00
D-$22.50 (CORRECT)
E-$27.00

I am having trouble understanding where to start on this question.

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Milan Prodanovic
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by N:Dure » Tue Dec 21, 2010 8:05 am
Cost = $ 15 (given)

Cost+Profit = 15 * 1.2 = 18

Listing Price = 0.8 (for the 20% commission taken off) x = 18

x = $ 22.5
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by milanproda » Tue Dec 21, 2010 3:00 pm
Thanks!
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by Tani » Tue Dec 21, 2010 6:04 pm
If you are having difficulty starting, try backsolving. Select either B or D and apply the terms of the question. For example, starting with $18.50 as the price the buyer see, you subtract the 20% that the online store takes ($18.50*.80 = $14.80). Already the price is too low since the distributor would not even cover his $15.00 cost, so the price would have to be higher.

Starting with $22.50 as the online price, subtracting the 20% for the online store ($22.50 * .80 = $18.00) If the distributor wants a 20% margin, he would have to buy the product for ($18.00 * .8 = $15.00) There's your answer.
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