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.
Let the original cost price (CP) of one article = 100
Step 1: Original marked price
Marked at 25% above CP
MP = 125
Step 2: New cost price after reduction
Cost price reduced by 5%
New CP = 95
Step 3: Selling price after discount
Discount = 8% on MP
SP = 92% of 125 = 115
Step 4: Profit per article (new)
Profit = 115 − 95 = 20
Profit % per article = $\frac{20}{95} \times 100 \approx 21.05\%$
Step 5: Compare with original situation
Original profit per article = 25
Original profit % = 25%
Sales increase by 25%, so total profit depends on both profit per article and quantity sold.
- Original total profit ∝ 25 × 100 = 2500
- New total profit ∝ 20 × 125 = 2500
Result
Total profit remains the same.
Correct answer: profit remains unchanged.