An article is sold at a profit of 20%. If both the cost price and selling price were to be $20 less, the profit made would be 10% more. What is the cost price of the article?
The Usual Method
Let the cost price of the article be $x.
Hence selling price = 1.2x
Reduced cost price = (x – 20)
Reduced selling price = (1.2x – 20)
Hence, profit % = = 20% + 10% = 30%
= Cost price
Estimated Time to arrive at the answer = 60 seconds.
As can be seen that by a reduction in cost price, there is an increase in profit %. The increase in profit % = %
So, for a 50% increase, there should be a 33.33% reduction in cost price (as explained in the Percentages section of Stuff to Remember)
Hence, the original cost price should be such that a reduction of $20 is equivalent to a reduction of 33.33%.
Hence, original cost price =
Estimated Time to arrive at the answer = 10 seconds.