Profit and Loss questions are a common topic in the quantitative reasoning section of the GMAT. These questions require you to apply basic mathematical concepts to solve problems related to buying and selling goods or services. Solving profit and loss questions can seem daunting at first, but with a few key strategies, you can master this topic and ace the GMAT quant section.
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First, let’s review some key concepts related to profit and loss.
Profit is the difference between the selling price and the cost price of a product or service. On the other hand, the loss is the difference between the cost price and the selling price. To calculate the profit or loss percentage, you divide the profit or loss amount by the cost price and multiply by 100.
For example, if you bought a product for $100 and sold it for $120, your profit is $20, and your profit percentage is 20%.
If you bought a product for $100 and sold it for $80, your loss is $20, and your loss percentage is 20%.
Now, let’s dive into some strategies for solving profit and loss questions on the GMAT:
- Understand the question: The first step in solving any problem is to understand what the question is asking. Read the question carefully and identify what information is given and what you need to find.
- Use the formulae: As mentioned earlier, profit and loss questions require you to use some basic formulae. Make sure you are comfortable using these formulae and understand how to apply them in different scenarios.
- Simplify the problem: Sometimes, profit and loss questions can be long and complex. To make them easier to solve, try simplifying the problem by breaking it down into smaller parts or by eliminating irrelevant information.
- Use common sense: Profit and loss questions often involve real-world scenarios. Use your common sense and intuition to make educated guesses and estimates.
- Practice: As with any other topic on the GMAT, practice is key to mastering profit and loss questions. Solve as many practice questions as you can, and review your mistakes to understand where you went wrong.
We have created a cheat sheet with all the important formulae required to solve profit and loss questions. Click here to download it now.
With the help of a few examples, we will understand how to solve tricky problems in profit and loss.
All of the examples have been taken from GMATPoint Daily Targets. Daily Targets is an indispensable tool for any serious GMAT aspirant. Here you will get 5 questions from VR and 5 questions from QA daily, and you have to answer within a time limit. After solving the questions, you will be provided with video solutions of how to solve these questions in the best manner possible. If you are a serious GMAT aspirant, this is an indispensable tool for you. Take your first daily target now!
Alright, now let’s look at some examples.
Q1. Profit earned on selling 6 apples for Rs 15 or 7 oranges for Rs 122.5 is 25%. Find the approximate net profit or loss percentage if 9 apples and 12 oranges are sold for Rs 200.
A. 7% profit
B. 5% loss
C. 7.5% profit
D. 4% loss
E. 4.5% loss
Answer: 25% profit is realized on the sale of 6 apples for Rs 15
Cost price of 6 apples = 15/1.25= Rs 12
Cost price per apple = 12/6= Rs 2
Cost price of 9 apples = 9*2 = Rs 18
25% profit is realized on the sale of 7 oranges for Rs 122.5.
Cost price of 7 oranges = 122.5/1.25=Rs 98
Cost price per orange = 98/7= Rs 14
Cost price of 12 oranges = 14*12 = Rs 168
Total cost price = 168+18=Rs 186.
Profit earned = 200-186 = Rs 14.
profit percentage= 14/186 ≃ 7.5 % ≃ 7.5 %
Q2. A shopkeeper bought 30 watches at the same price. The selling price of the first 24 watches was the same, and the remaining watches were sold at a 25% higher price. What was the average profit on each watch?
Statement I: The profit earned on each of the first 10 watches was Rs 200
Statement II: If the average selling price of the 30 watches were Rs 25 more, the overall profit would have been Rs Rs 1830.
(A) Statement (1) alone is sufficient but statement (2) alone is not sufficient.
(B) Statement (2) alone is sufficient but statement (1) alone is not sufficient.
(C) Both statements (1) and (2) together are sufficient, but neither statement alone is sufficient.
(D) Each statement alone is sufficient.
(E) Statements (1) and (2) together are not sufficient to answer the question asked, and additional data is needed.
Answer: Let the cost price of each watch be x.
Total cost price = 30x
Statement I: Given the profit earned on the first 10 watches was Rs 200.
Thus, the profit earned on each of the first 24 watches = Rs 20
So, the selling price of the first 24 watches = 24(x + 20) = 24x + 480
The selling price of the remaining 6 watches = 6*1.25(x+20) = 6(1.25x + 15) = 7.5x + 90
Profit = 31.5x + 570 – 30x = 1.5x + 570
Since we do not have the value of x, this statement is not sufficient to answer the question.
Let the average selling price of 30 watches be y.
Given that the profit, when the selling price is (y+25), is 1830
Thus, if the average selling price were y, the total profit = 1830 – 30*25
=> The total profit = Rs 1080
Thus, average profit = 1080/30 = Rs 36
Thus, this statement is sufficient to answer the question.
The correct option is B.
Q3.In April, a restaurant sold 4000 dishes at an average price of $3.5. If the restaurant incurs daily costs of $50 for raw products and $150 for wages, as well as monthly costs of $2000 for marketing and $2500 for rent, what is the restaurant’s profit percentage?
In April there are 30 days.
Total costs incurred = 50*30 +150*30+ 2000 + 2500 = 10500$
Total revenue generated = 3.5*4000 = 14000$
Profit Percentage = 14000−10500/10500×100=33.33%
Solving profit and loss questions on the GMAT requires you to understand some basic formulae, simplify the problem, and practice. By using these strategies, you can confidently approach profit and loss questions on the GMAT and improve your chances of getting a high score.
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