A merchant purchased a jacket for $60 and then determined

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BTGModeratorVI: Legendary Member; Posts: 1223; Joined: Sat Feb 15, 2020 2:23 pmFollowed by: 1 member

by BTGModeratorVI » Fri May 29, 2020 6:46 am

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A merchant purchased a jacket for $60 and then determined a selling price that equaled 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

Answer: C
Source: Official guide

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Source: Beat The GMAT — Problem Solving | Fri May 29, 2020 6:46 am

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Brent@GMATPrepNow: GMAT Instructor; Posts: 16207; Joined: Mon Dec 08, 2008 6:26 pmFollowed by: 1268 members; Location: Vancouver, BC; Thanked: 5254 times; GMAT Score:770

Re: A merchant purchased a jacket for $60 and then determined

by Brent@GMATPrepNow » Sat May 30, 2020 6:33 am

BTGModeratorVI wrote: ↑
Fri May 29, 2020 6:46 am
A merchant purchased a jacket for $60 and then determined a selling price that equaled 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

Answer: C
Source: Official guide

Let x = the SELLING PRICE

A merchant purchased a jacket for $60 and then determined a selling price that equaled the purchase price of the jacket plus a markup that was 25 percent of the selling price.
We can write: x = $60 + (25% of x)
In other words, x = $60 + 0.25x)
Subtract 0.25x from both sides to get: 0.75x = 60
Divide both sides by 0.75 to get: x = 80
So the selling price is $80

During a sale, the merchant discounted the selling price by 20 percent and sold the jacket.
We can write: DISCOUNTED price = $80 - (20% of $80)
= $80 - (0.20)($80)
= $80 - $16
= $64

What was the merchant's gross profit on this sale?
Gross profit = $64 - $60 = $4

Answer: C

Cheers,
Brent

Brent Hanneson - Creator of GMATPrepNow.com

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deloitte247: Legendary Member; Posts: 2214; Joined: Fri Mar 02, 2018 2:22 pmFollowed by: 5 members

Re: A merchant purchased a jacket for $60 and then determined

by deloitte247 » Sun May 31, 2020 6:17 am

Cost price = $60; selling price = 60 + markup price
Let markup price = x; selling price = 60 + x

x = 25% of (60 + x)
x = (0.25 * 60) + 0.25x
0.75x = 15 and x = $20. Therefore, selling price = 60 + 20

Discounted price = 20% of selling price = $80
= 20% * 80
= 0.2 * 80 = $16
New selling price = $80 - $16 = $64

Merchant's gross profit sale = new selling price - cost price
= $64 - $60 = $4

Answer = C

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