I love math but hate GMAT math.
Anyway, I'm getting confused with the terminology in this question. If the markup is 40% is that not the same thing as the profit? ie. isn't the markup the difference between the selling price and the cost?
I might be missing something basic here. With this thinking, I just had selling price = to 140% of cost and got the answer wrong. I've seen how people solve it but I just don't understand the business or visual part of it.... HELP!
PS - Why am I asking these types of questions 2 weeks before my exam
No, mark up is the difference between cost price and list price (or tag price or marked price). The list price may be different from selling price if the store offers a discount.
Look at it from the store's perspective. It buys a shirt at $100 and marks it up by 50% i.e. writes $150 as the list price on the shirt. The shirt doesn't sell for a month after which the store has a sale of 10% on everything. Someone buys the shirt during the sale at this 10% discount i.e. 150 - 10% of 150 = $135. So the selling price of the shirt is $135. So here, mark up was 50% but profit was 35%.
Anyway, in this question, there is no discount but the mark up is given as 40% of the selling price. So it is not 40% of $150 but instead, 40% of Selling price which is obtained by adding mark up to $150.
So if selling price is S,
150 + 40% of S = S
S = 250
Profit = 100 which is calculated on cost price in % terms. So 100/150 * 100 = 66.67% is profit.
Note that usually mark up is also calculated on cost price and hence mark up percentage would be 100/150 = 66.7% - i.e. same as profit% since there is no discount in this case. This question just gives you mark up on selling price and hence you need to do suitable modifications.
wow, thanks for the explanation on the list price bit. i guess that was the missing link, i too was having a hard time trying to understand why there's a gap in the understanding. the list price part fill in the void nicely!