A shopkeeper marks up the cost price of an item by 40% and then offers a 20% discount on the marked price during a promotional sale. What is the net profit percentage realized on the cost price?
Answer and explanation
Correct answer: C. 12% profit
- Step 1: Let the cost price (CP) be 100 USD.
- Step 2: Marked price (MP) after 40% markup = 100 + 0.40(100) = 140 USD.
- Step 3: Selling price (SP) after 20% discount on MP = 140 (1 - 0.20) = 140 0.80 = 112 USD.
- Step 4: Net profit = SP - CP = 112 - 100 = 12 USD.
- Step 5: Net profit percentage = (12 / 100) * 100 = 12%.
Answer
12% profit.
Why not the others: '20% profit' subtracts percentages directly (40% - 20% = 20%), which is fundamentally incorrect because the discount applies to the marked price, not the cost; '10% profit' and '16% profit' result from inaccurate decimal multiplication.
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