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Profit & Loss - December 15, 2003
The GMAT Sample Math question for the day is from the topic Profit & Loss.
Question
A merchant who marked his goods up by 50% subsequently offered a discount of 20%. What is the percentage profit that the merchant make after offering the discount?
A. 30%
B. 125%
C. 25%
D. 20%
E. Insufficient Data
The correct choice is (D) and the correct answer is 20%.
Explanatory Answer
The easiest way to solve these kinds of problems is to assume a cost price for the merchant.
To make calculations easy, let us assume that the cost price = $100
The merchant marks his goods up by 50%.
Therefore, his quoted price = cost price + mark up
= $100 + 50% of $100 = 100 + 50 = $150
Now, the merchant offers a discount of 20% on his quoted price
Therefore, amount of discount = 20% of $150 = 20% of 150 = $30
Therefore, he finally sells it for $150 – $30 = $ 120.
We assumed his cost to be $ 100 and he sold it finally for $ 120.
Therefore, his net profit = $ 20 on his cost of $ 100
Hence, his % profit =  = 20%.
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