The owner of a garment shop labelled his articles at 25% above the cost-price. Due to a slump in the market, his cost price was reduced by 5% but he keeps the marked price same. He thus offers a discount of 8%, due to which the sales increase by 25%. Calculate the change in owner's profit?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → profit remains unchanged.
Total profit is profit per article × number of articles sold, so the profit on one article is found before and after the change, and the new one is multiplied by the higher sales.
Assuming the original cost price to be 100 and the number of articles sold to be 100:
Marked price \(=100+25=125\) (25% above cost)
Before: profit per article \(=125-100=25\), so total profit \(=25\times100=2500\)
New cost price \(=100-5=95\) (5% lower)
Selling price after 8% discount on 125: \(125-10=115\)
After: profit per article \(=115-95=20\)
Sales rise by 25%, to 125 articles, so total profit \(=20\times125=2500\), the same as before