Problem Solving

BTGmoderatorLU wrote:Source: Manhattan GMAT

A vendor sells specialty gift baskets at a price of $50.00 per basket, which represents a markup of 25% above the cost to produce each basket. The vendor prepared and delivered an order of 120 baskets to a customer. However, that customer returned 15 baskets and requested a partial refund. How much should the vendor refund per basket so that the vendor makes a 20% profit on the initial cost of the 120 baskets?

A. $10
B. $16
C. $20
D. $34
E. $40

The OA is B

Given that the vendor marks up 25% above the cost, the cost per basket = 50 / (100 + 25)% = $40;

Selling price per basket to make 20% profit = 40 + 20% of 40 = $48.

Thus, the vendor can return (50 - 48)*120 = $240 for 15 baksets

=> The vendor should refund 240/15 = $16 per basket so that the vendor makes a 20% profit on the initial cost of the 120 baskets.

The correct answer: B

Hope this helps!

-Jay
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BTGmoderatorLU wrote:Source: Manhattan GMAT

A vendor sells specialty gift baskets at a price of $50.00 per basket, which represents a markup of 25% above the cost to produce each basket. The vendor prepared and delivered an order of 120 baskets to a customer. However, that customer returned 15 baskets and requested a partial refund. How much should the vendor refund per basket so that the vendor makes a 20% profit on the initial cost of the 120 baskets?

A. $10
B. $16
C. $20
D. $34
E. $40

The OA is B

Letting n = the vendor's cost of each basket, we have:

1.25n = 50

n = 50/1.25 = $40

Since the vendor charged (and received from) the customer 50 x 120 = $6000 for the 120 baskets but had to issue a partial refund and still realize a profit of 20% on the cost, the vendor needed to make 40 x 1.2 x 120 = $5760. Therefore, he had to refund 6000 - 5760 = $240 in total, or 240/15 = $16 per basket that was returned.

Answer: B