An electronics store purchased a CD player at a wholesale price of 60$ and then sold it at a 40 percent discount off the original retail price. If the store made a 25 percent profit on the wholesale price of the CD player, what was the store's profit as a percent of the original retail price?
This is a good question that tests the candidate in understanding the concept of profit and loss. Also, I am quite surprised by the fact that the average time taken by the student to solve this question was 2:33 mins. Then, I started wondering, how many of you treat
Profit and Loss as an
application of percentage increase/ decrease rather than thinking of it in terms of formulae. If you follow the former, you could have solved this question much more easily.
The concept is very simple and easy to apply.
Let's start by understanding the relationship between CP, Profit %, SP as well as MP, Discount %, SP
CP, Profit %, SPWhen the cost price (CP) is increased by Profit %, we will get the selling price (SP) MP, Discount %, SPWhen the marked price (MP) is reduced by Dis %, we will get the selling price (SP).Let's try and apply this understanding in the above question.
The cost price (CP) here is 60 $ and he sold it by making a 25% profit.
So, When CP is increased by 25 %, we will get its SP i.e 60 + 25% of 60 = 60 + 15 = 75 $ or we can calculate as 125% of 60. Either way, you will end in the same SP.
Remember, the Profit here is nothing but the value increased by i.e 15$.
Also, a 40 % discount is applied on the original retail price i.e marked price (MP).
So, When MP is reduced by 40 %, we should get the same SP.
60% of MP = 75
MP = 75 * 100 /60 = 125$
Since , we are asked to find the stores profit as a percent of the
original retail price (MP) i.e 15/125 * 100 = 12 %
Hence,
Option B is the answer.
Thanks,
Clifin J Francis,
GMAT Quant SME