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What was the cost of the item before it was reduced?

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by gmattesttaker2 » Wed Dec 25, 2013 10:21 am
Hello,

Can you please assist with this:

The new cost of an item is $200. If the retail price of the item does not change and the
profit the retailer makes on the item increases from 10% to 20% of the sale price,
what was the cost of the item before it was reduced?

(A) $225
(B) $230
(C) $235
(D) $240
(E) $245

OA: A


Thanks a lot,
Sri
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by GMATGuruNY » Wed Dec 25, 2013 1:40 pm
The new cost of an item is $200. If the retail price of the item does not change and the
profit the retailer makes on the item increases from 10% to 20% of the sale price,
what was the cost of the item before it was reduced?

(A) $225
(B) $230
(C) $235
(D) $240
(E) $245
Let x = the selling price.

New cost = $200:
Since the profit is 20% of the selling price, the new cost = 80% of the selling price:
200 = .8x
x = 200/.8 = 2000/8 = 250.

Old cost:
Since the profit is 10% of the selling price, the old cost = 90% of the selling price:
Old cost = .9(250) = 225.

The correct answer is A.
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