GMAT Quant Questions | Profit Loss Q12

The given question is a GMAT 650 level problem solving question from the topic Profit, Loss & Discounts. This GMAT quant question tests the concept of computing percentage profit when sold at a discount to the marked price.

Question 12: By selling an article at 80% of its marked price, a merchant makes a loss of 12%. What % profit will the merchant make if the article is sold at 95% of its marked price?

1. 5% profit
2. 1% loss
3. 10% profit
4. 5.5% profit
5. 4.5% profit

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Video Explanation

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Explanatory Answer | GMAT Profit Loss Q12

Approach: Assume cost price to be $100

Let the marked price be S and the cost price of the article be $100.

When the article is sold at 80% of its marked price, selling price is 0.8S.
Selling the article at 0.8S results in a loss of 12% of the cost price.
Therefore, the loss incurred when selling at 0.8S = 12% of 100 = $12.

Hence, when selling at 80% of the marked price, the article is sold at 100 − 12 = $88.
i.e., 0.8S = $88.
or S = \\frac{88}{0.8}) = $110.
If the merchant sells at 95% of the marked price, then the new selling price of the article is 95% of $110 = $104.5

The profit made = 95% of Selling Price − Cost Price = 104.5 − 100 = $4.5.
% Profit = \\frac{\text{profit}}{\text{cost price}} = \frac{4.5}{100}) = 4.5%
The merchant made 4.5% profit

Choice E is the correct answer.