Profit & Loss

[john123]

When a producer allows 36% commission on the retail price of his product ,he earns a profit of 8.8%. What would be his profit percent if the commission is reduced by 24%?

[Mike@Magoosh]

Hi, there. I'm happy to help with this.

Let's call the selling price, the retail price, P.

The producer allows the sales person to take a 36% commission, so the sales person pockets 0.36*P. That means, the producer gets 0.64*P.

Now, we are told, this 0.64*P that the producer pockets represent a 8.8% profit. In other words, if the producer's cost is C, he is now pocketing 1.088*C.

1.088*C = 0.64*P ------ divide both sides by 0.64

1.7*C = P

That equation relates the cost and the price. Assume neither of those changes.

In the second half of the problem, the wording is atrociously ambiguous --- does the commission drop 24 percentage points to a 12% commission, or does it decrease by 24% to 36%*(0.76) = 27.36%??? The real GMAT will not give you a problem with such a screaming ambiguity in its wording. For simplicity, I am going to assume they mean: the commission dropped 24 points to an even 12% commission.

Now, the poor salesperson pockets only 0.12*P (and, with income reduce to 1/3 of its previous value, presumably has trouble paying rent). The producer, meanwhile, pockets 0.88*P. In terms of cost, this is:

0.88*P = 0.88*(1.7*C) = 1.496*C

That's a 49.6% profit over and above cost, so that's the new profit for the producer.

Does all that make sense?

Please let me know if you have any questions.

Mike

[pemdas]

i don't know why people keep posting Indian CAT questions on this forum. Such questions are not administered in GMAT neither their authors put objective to test the right percentiles for GMAT takers. I can also start posting questions from my high school books or what is even less appealing from my pre-college math guides. They too test math topics mentioned in GMAT curriculum, but I have no idea who are the authors of these questions and do they have any relation to GMAT.

@Mike, your effort on this question should cost at least one thank from a member. If I were you, I would not even look at this question from the beginning. But anyway, thanks for your contribution into this *useless* for GMAT question.