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# m07 q33

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Intern
Joined: 01 Aug 2008
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08 Sep 2008, 11:39
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A shop purchased a pair of sunglasses for $120 and was selling it at a price that equaled the purchase price of the sunglasses plus a markup that was 25 percent of the selling price. After some time a shop owner decided to decrease the selling price by 20 percent. What was the shop's gross profit on this sale? A.$0
B. $2 C.$4
D. $6 E.$8

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Current Student
Joined: 19 Nov 2012
Posts: 205

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Concentration: Marketing, Social Entrepreneurship
GMAT 1: 750 Q47 V47

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20 Nov 2013, 09:52
1
KUDOS
One of my duties at work is to set prices for retailers, so this may help some people:

When including a markup for the retailer, you want the markup INCLUDED in the price. Your goal thus becomes "what does my price need to be so that 25% of the final price will be profit?

The general formula: Retail Price = Purchase Price / 1-Desired Markup

For example:

If Bob bough a pair of pants for $100 and wanted to make 25% on his investment, he would simply multiply 100*1.25 for a figure of$125. Bob makes $25. However, the % of the sale which Bob puts in his pocket is$25/$125=20% If Bob bought a pair of pants for$100, and wanted 25% of the the SALE price to go into his pocket, he would divide the desired percentage into the price, therefore $100/(1-0.25) =$100/0.75 = $133.33. Notice that Bob is now making$33.33. $33.33/$133.33 = 25% Therefore, 25% of the sale price was profit for Bob.

I hope this helps.

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Math Expert
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23 Nov 2012, 06:21
Expert's post
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mbafwi wrote:
If a company sells $$S$$ tons (1 ton = 1000 kilograms) of product A annually and charges $$B$$ dollars per ton, what is the profit if it costs $$G$$ dollars to manufacture a kilogram of product A and $$P$$ dollars to ship it to the customer?

(A) $$b-1000g+1000p$$
(B) $$bs-\frac{g+p}{1000}$$
(C) $$(b-(g+p))*s$$
(D) $$\left(\frac{g}{1000}-(b+p)\right)*s$$
(E) $$\left(\frac{b}{1000}-(g+p)\right)*1000s$$

[Reveal] Spoiler: OA
E

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My Question: I believe this solution is wrong. The final answer has units of $/kg inside the parenthesis, multiplied by S which is in tons. If somebody sees something I don't, let me know. Also, the explanation is confusing since they say use$5/kg as B, but then divide B by 1000 in the final equation (which converts /ton to /kg). Another thing is the question doesn't say if the shipping cost is per ton or per kg. Overall, this is a confusing question, confusing enough to have a wrong answer, so should probably be thrown away or reworded.

This question was replaced by the following one:

A shop purchased a pair of sunglasses for $120 and was selling it at a price that equaled the purchase price of the sunglasses plus a markup that was 25 percent of the selling price. After some time a shop owner decided to decrease the selling price by 20 percent. What was the shop's gross profit on this sale? A.$0
B. $2 C.$4
D. $6 E.$8

Let the markup be $$x$$, so $$x$$ must be 25% of the selling price, which would be $$120+x$$: $$x=0.25(120+x)$$ --> $$x=40$$. Hence the selling price was $$120+40=160$$.

The price after the discount of 20% would be $$160*0.8=128$$ --> gross profit on the sale: final selling price - cost of the sunglasses = $$128 - 120 = 8$$.

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Intern
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19 Nov 2013, 06:44
Can you explain why it's not 1.25*120=150? I am confused on how you got to 160 from 120 if the markup is 25%.

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19 Nov 2013, 06:48
cf1988 wrote:
Can you explain why it's not 1.25*120=150? I am confused on how you got to 160 from 120 if the markup is 25%.

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The stem says a markup was 25 percent of the selling price not of the purchase price ($120). _________________ Kudos [?]: 129248 [0], given: 12196 Manager Joined: 11 Jan 2011 Posts: 69 Kudos [?]: 25 [0], given: 3 GMAT 1: 680 Q44 V39 GMAT 2: 710 Q48 V40 Re: m07 q33 [#permalink] ### Show Tags 19 Nov 2013, 12:26 A shop purchased a pair of sunglasses for$120 and was selling it at a price that equaled the purchase price of the sunglasses plus a markup that was 25 percent of the selling price. After some time a shop owner decided to decrease the selling price by 20 percent. What was the shop's gross profit on this sale?

I did it slightly different than Bunuel but the concept is the same.

Let x = selling price

x = 120 + .25(x)
.75x = 120
x = $160 = selling price .80 x$160 = 128 = discounted selling price

128 - 120 = $8 Kudos [?]: 25 [0], given: 3 Intern Joined: 15 Nov 2013 Posts: 5 Kudos [?]: [0], given: 0 Re: m07 q33 [#permalink] ### Show Tags 19 Nov 2013, 14:16 Purchase Price+ 0.25*Selling Price= Selling Price Selling Price = 120/.75 = 160 New Selling Price after 20% decrease= 120*.8=128 Profit: New Selling Price-Purchase Price: 120-120= 8 Answer (E) Kudos [?]: [0], given: 0 Intern Joined: 17 Oct 2013 Posts: 5 Kudos [?]: [0], given: 1 Re: m07 q33 [#permalink] ### Show Tags 28 Nov 2013, 02:36 Can anyone provide the solution for the first question. I am not able to solve it. Kudos [?]: [0], given: 1 Math Expert Joined: 02 Sep 2009 Posts: 41884 Kudos [?]: 129248 [0], given: 12196 Re: m07 q33 [#permalink] ### Show Tags 28 Nov 2013, 02:59 thatsmeshilpa wrote: Can anyone provide the solution for the first question. I am not able to solve it. Please tell the # of the question M?-? _________________ Kudos [?]: 129248 [0], given: 12196 Intern Joined: 04 Aug 2013 Posts: 8 Kudos [?]: [0], given: 7 Re: m07 q33 [#permalink] ### Show Tags 28 Nov 2013, 18:33 While I understand Bunuel's explanation, isn't the question a little ambiguous when it says decrease the SP by 20%- I mean it hasn't clarified whether its talking about the SP inclusive of Mark Up or the original SP? mbafwi wrote: A shop purchased a pair of sunglasses for$120 and was selling it at a price that equaled the purchase price of the sunglasses plus a markup that was 25 percent of the selling price. After some time a shop owner decided to decrease the selling price by 20 percent. What was the shop's gross profit on this sale?

A. $0 B.$2
C. $4 D.$6
E. $8 Source: GMAT Club Tests - hardest GMAT questions Kudos [?]: [0], given: 7 Math Expert Joined: 02 Sep 2009 Posts: 41884 Kudos [?]: 129248 [0], given: 12196 Re: m07 q33 [#permalink] ### Show Tags 29 Nov 2013, 02:35 Shibs wrote: While I understand Bunuel's explanation, isn't the question a little ambiguous when it says decrease the SP by 20%- I mean it hasn't clarified whether its talking about the SP inclusive of Mark Up or the original SP? mbafwi wrote: A shop purchased a pair of sunglasses for$120 and was selling it at a price that equaled the purchase price of the sunglasses plus a markup that was 25 percent of the selling price. After some time a shop owner decided to decrease the selling price by 20 percent. What was the shop's gross profit on this sale?

A. $0 B.$2
C. $4 D.$6
E. \$8

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The mark up is included in selling price.
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Re: m07 q33   [#permalink] 29 Nov 2013, 02:35
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# m07 q33

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