Acer86 wrote:
A merchant purchased a jacket for $60 and then determined a selling price that equalled 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
First of all, the question has very ambiguous language. They have to distinguish between marked price and selling price and they fail to do that. This is what the question needs to change:
A merchant purchased a jacket for $60 and then determined a
mark-up price that equaled the purchase price of the jacket plus a markup that was 25 percent of the
mark-up price. During a sale, the merchant discounted the
mark-up price by 20 percent and sold the jacket. What was the merchant’s gross profit on this sale?
Here, mark up was 25% of mark-up price so purchase price was 75% of mark-up price i.e. purchase price was increased by 33.33% to get mark up price (25 is 33.33% of 75)
\((1 + Mark Up%) * (1 - Discount%)= (1 + Profit%)\)
\((1 + \frac{1}{3})*(1- \frac{1}{5}) = (1 + Profit%)\)
\(Profit% = \frac{1}{15}\)
Hence you get a profit of $1 for every $15 of purchase price. Since purchase price is 4*15, profit will be 4.
For more on the formula and concept of Mark up, discount, check:
http://www.veritasprep.com/blog/2011/02 ... nt-profit/ _________________
Karishma
Veritas Prep GMAT Instructor
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