Bunuel wrote:
If a merchant makes a profit of 20% based on the selling price of an article, what percent does the merchant make on the cost?
(A) 20
(B) 40
(C) 25
(D) 80
(E) None of these
We can let R = selling price and C = cost and create the equation:
R - C = 0.2R
0.8R = C
In terms of R, we see that the profit is 0.2R and the cost is 0.8R. Thus the profit as percent of cost is:
0.2R/0.8R = 0.2/0.8 = 2/8 = 1/4 = 25%
Alternate Solution:
Let’s assume the selling price is $100 and let c = the cost of the item. We know that selling price - cost = profit, or:
100 - c = 100 x 0.2
100 - c = 20
80 = c
Since the cost of the item is $80 and the profit made on its sale is $20, we see that the profit as a percent of cost is 20/80 = 1/4 = 25%.
Answer: C
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