A distributor sells a product through an on-line store, whic

Producer price = $15;

The distributor wants to maintain a 20% profit on the cost of the item, thus he must get $15*1.2 = $18 after the store takes a commission of 20% of the final price --> (final price)*0.8 = $18 --> (final price) = $22.5.

Answer: D.
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Cost price to distributor = 15

Lets say he adds "x" to it for online display

Selling price on web display = (15+x)

Online merchant takes 20% commission; so balance = \(80 * \frac{(15+x)}{100}\) ......(1)

Distributor wants to earn 20% i.e 15 + 3 = 18 ........... (2)

Equating (1) & (2)

\(80 * \frac{(15+x)}{100} = 18\)

x = 7.5

Selling price should be 15 + 7.5 = 22.5 = Answer = D

Cool solutions.

Another way to solve this:
Let Price set by the Distributor on Online store : S
So the Distributor need 20% profit on the producer cost of $15 = 18$

S=18+S*0.2
S-S*0.2=18
S*.8=18
S=22.5

Regards,
Rrsnathan.

Press Kudos it this helped

the qn does not mention whether the commission is also part of the cost. its confusing.

We know that margin is revenue over costs. The cost in the case will be the price that the buyer will see online. The costs will be the cost of the product itself ($15) and the margin that the online store gets (20% of the price), so:

\(p = \frac{revenue}{costs}\)


\(1.2 = \frac{p}{15+0,2p} \rightarrow p = $22,5\)

Hope it helps.

Hi Bunuel, please mention in the question that 'cost' does not include the commission that needs to be paid by the distributor. Otherwise it is confusing.

It was my understanding that only profits and the respective costs can be added to the cost of the product at each stage, anything else must be subsumed within the maximum retail price of the product, so it is implied that the commission is inclusive of the displayed price.

Price including the commission = \(15 + 0.2(15) = $18.\)

The e-seller takes commission on this \($18\), so his display price must be inclusive of his commission.

So we have, \($18 +\)commission = \(100\%\) of display price. Since the commission is \(20\%\), the \($18\) corresponds to \(80\%\) of the display price, therefore the display price = \(\frac{18}{0.8} = $22.5.\) Ans - D.
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Since it costs the distributor $15 per item and he wants to have a 20% profit, he needs to sell the product (if there is no commission) for:

15(1.2) = 18

However, since there is a commission of 20% of the price set by the distributor, we can let x = the price set by the distributor and create the following equation:

x - 0.2x = 18

0.8x = 18

x = 18/0.8 = 180/8 = 22.5

Answer: D
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cost $15
net 20% $15 = $3
sale price = $15+3 = $18
final price x = $18+0.2x, 0.8x = 18, x = $22.5

Ans (D)

.8x-15/15 *100 = 20
.8x as seller gives 20% away as commission
solve for x