angelfire213 wrote:
hi all.
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
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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.