Hi Mechmeera,

The math involved in this question is essentially just arithmetic, but you'll have to be careful with how you organize your work (and adding some extra 'labeling' will probably help).

We're told that the original cost of a pair of sunglasses was $120 and the planned selling price included a mark-up equal to 25% of the SELLING PRICE.

Original Cost = $120
Planned Sell Price = $120 + (25%)(Sell Price) = Sell Price

120 + .25P = P
120 = .75P
120 = (3/4)P
(4/3)(120) = P
160 = P

Now we know the planned sell price was $160.

Next, we're told that the shop owner decreased THIS price by 20%....

$160 - (20%)($160) = $160 - $32 = $128

With the original cost ($120) and this new sell price ($128), the gross profit was 128 - 120 = $8

Final Answer: E

GMAT assassins aren't born, they're made,
Rich

conquistador wrote:Source:Gmatclub

A shop purchased a pair of sunglasses for $120 and was selling it at a price that equaled the purchase price of the sunglasses plus a markup that was 25 percent of the selling price. After some time a shop owner decided to decrease the selling price by 20 percent. What was the shop's gross profit on this sale?

A. $0
B. $2
C. $4
D. $6
E. $8

If we let the selling price = r, the selling price for the glasses is:

r = 120 + 0.25r

0.75r = 120

r = 160

With the 20% decrease in price the new selling price is 0.8 x 160 = 128.

The profit on the sale is 128 - 120 = 8 dollars

Answer: E