If a merchant makes a profit of 20% based on the selling price of an

Question

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

pushpitkc · Answer

The profit is 20% of the selling price when an article sold at 100 was bought for 80.
Here, the profit of 20 is 20% of 100, the selling price of the article!

Therefore, the profit on the cost will be  \frac{20}{80}*100 = 25%   (Option C)

EgmatQuantExpert · Answer

Solution

• Percentage Profit based on selling price  = 20  %

o  \frac{(SP – CP)}{SP} = \frac{20}{100}

o  (1- \frac{CP}{SP}) = \frac{1}{5}

o  \frac{CP}{SP} = 1-\frac{1}{5} = \frac{4}{5}

o Thus,  \frac{SP}{CP} = \frac{5}{4}

• We need to find the profit with respect to the cost price

o Percentage profit  = (\frac{SP}{CP} – 1) * 100 = (\frac{5}{4} – 1) * 100 = 25 %

Correct Answer:   Option C

varun4s · Answer

Let Selling Price= 100

Profit (20% on SP)= 20

Cost Price= 100-20= 80

% profit on cost=  \frac{20}{80} *100= 25

Answer: C.

ScottTargetTestPrep · Answer

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

CrackverbalGMAT · Answer

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?

Assume that SP = $100

Profit = 20 % of SP as mentioned in the question
 = 20 % of 100 = $20

CP = SP - Profit = 100 - 20 = 80$

what percent does the merchant make on the cost?
 \frac{Profit}{CP}* 100  =  \frac{20}{80}*100  =  \frac{1}{4 }*100  =  25 %

Option C is the answer.

Thanks,
  Clifin J Francis,
GMAT SME

ymer · Answer

This phrase "profit of 20% based on the selling price", means margin/price --> 0.2 = M/P
Also, margin is the diference between price and cost --> M = P-C
And with those --> 0.2 = (P-C)/P
 --> 0.2P = P-C
 --> -0.8P = -C
 --> P/C=1/0.8
 --> P/C=10/8
 --> P/C=5/4
 --> P/C=1,25
 --> Margin over cost is 25%
 --> ANS: C

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