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A trader normally makes a profit of 40% on items he sells. If he reduc

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A trader normally makes a profit of 40% on items he sells. If he reduc  [#permalink]

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New post Updated on: 14 Sep 2018, 11:12
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Question Stats:

39% (02:29) correct 61% (02:16) wrong based on 56 sessions

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A trader normally makes a profit of 40% on items he sells. If he reduces the price by 10%, his sales increase by 40%. Let x be the total profit when he doesn't reduce the price and y be the total profit when he reduces the price. What is the ratio of y to x ?

A) 1.28
B) 7.8
C) 1.11
D) 0.91
E) 0.25

Originally posted by selim on 13 Sep 2018, 01:26.
Last edited by selim on 14 Sep 2018, 11:12, edited 3 times in total.
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Re: A trader normally makes a profit of 40% on items he sells. If he reduc  [#permalink]

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New post 13 Sep 2018, 02:01
selim wrote:
A trader normally makes a profit of 40% on items he sells. If he reduces the price by 10%, his sales increase by 40%. Let x be the total profit when he doesn't reduce the price and y be the total profit when he reduces the price. What is the ratio of x to y ?

A) 1.28
B) 7.8
C) 1.11
D) 0.91
E) 0.25


Let, Initial Cost = 100
Initial Selling Price = 140 (@40% profit)
Initial Quantity sold = 100
Profit earned in this case, x = 40*100 = 4000

After reduction in price
Reduced Price = 126 (10% reduction)
Increased sale = 140 (40% increase)
Profit earned in this case, y = 26*140 = 3640

x/y = 4000/3640 = 1.098 ≈ 1.1

Answer: Option C
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Re: A trader normally makes a profit of 40% on items he sells. If he reduc  [#permalink]

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New post 13 Sep 2018, 03:38
It says D is the answer. For that the question should ask the ratio y/x

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Re: A trader normally makes a profit of 40% on items he sells. If he reduc  [#permalink]

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New post 13 Sep 2018, 05:07
selim wrote:
A trader normally makes a profit of 40% on items he sells. If he reduces the price by 10%, his sales increase by 40%. Let x be the total profit when he doesn't reduce the price and y be the total profit when he reduces the price. What is the ratio of x to y ?

A) 1.28
B) 7.8
C) 1.11
D) 0.91
E) 0.25


I am assuming that we are talking about the 40% increase in sales of volume, not sales revenue
Let's say normally he sells 100 items of $10 each on which he makes a profit of 4% i.e. a profit of 100*4 = $400 = x
When he gives a discount of 10%, his effective profit is
40 - 10 + (40)*(-10)/100 = 26% which is $2.6 in case of $10 CP of each item.
But he sells 140 items.
So his profit = 140*2.6 = 364 = y

x/y = 1.099 which is closest to 1.11 but this option is certainly misleading.
Had (C) been 1.1, it would have been fine (rounded up) but I am not happy with 1.11.

It would have been far better had the question asked for y/x to get 0.91 as the answer.
Besides, the calculations involved are not GMAT-like. What is the source of this question?
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Re: A trader normally makes a profit of 40% on items he sells. If he reduc  [#permalink]

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New post 14 Sep 2018, 11:11
VeritasKarishma wrote:
selim wrote:
A trader normally makes a profit of 40% on items he sells. If he reduces the price by 10%, his sales increase by 40%. Let x be the total profit when he doesn't reduce the price and y be the total profit when he reduces the price. What is the ratio of x to y ?

A) 1.28
B) 7.8
C) 1.11
D) 0.91
E) 0.25


I am assuming that we are talking about the 40% increase in sales of volume, not sales revenue
Let's say normally he sells 100 items of $10 each on which he makes a profit of 4% i.e. a profit of 100*4 = $400 = x
When he gives a discount of 10%, his effective profit is
40 - 10 + (40)*(-10)/100 = 26% which is $2.6 in case of $10 CP of each item.
But he sells 140 items.
So his profit = 140*2.6 = 364 = y

x/y = 1.099 which is closest to 1.11 but this option is certainly misleading.
Had (C) been 1.1, it would have been fine (rounded up) but I am not happy with 1.11.

It would have been far better had the question asked for y/x to get 0.91 as the answer.
Besides, the calculations involved are not GMAT-like. What is the source of this question?


Edited. My apologies for the mistake. May i know why this question is not GMAT type ?

Source : This question is taken from a practice sheet of GMAT quant.
GMAT Club Bot
Re: A trader normally makes a profit of 40% on items he sells. If he reduc &nbs [#permalink] 14 Sep 2018, 11:11
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