The SBC GMAT Files

What’s In A Percent?

We usually do not get right into a question in our articles but let’s do it anyways:

Here we go with a GMATPREP question involving percents. Try to solve it yourself, then read on.

A furniture dealer purchased a desk for $150 and then set the selling price equal to the purchase price plus a markup that was 40 percent of the selling price. If the dealer sold the desk at the selling price, what was the amount of the dealer’s gross profit from the purchase and the sale of the desk?
A. $40
B. $60
C. $80
D. $90
E. $100

Many people solve the question above by taking 40 percent of $150, the only other number apparent in the question. 10 percent of 150 is $15, so 40percent of 150 is 4 times 10 percent, or $60. Choose B and move on.

And this, of course, is the wrong answer, but there’s a reason that answer choice B exists here. The GMAT question writers know how the average test taker thinks, and will craft the problem (and the answer choices) to meet any possible misinterpretation allowed by the  text. Your job is to realize that there’s probably something more afoot than just testing whether you know how to calculate 40% of 150.

I’ve heard people refer to “markup” questions, as if they’re a special subcategory of the GMAT. The truth is that there is nothing special about the word “markup”. The question above could replace “markup” with “margin”, “gross profit”, or just “sum”. This question plays upon a common issue in percent questions on the GMAT: a percent is always taken OUT of something, and it is imperative that you answer this very important question whenever you deal with percents: What is this percent taken FROM?

In the case of the question above, the markup is 40% of the selling price. Not of $150 (the purchase price), but of a selling price, as yet unknown. How do we determine the selling price?

The following bar chart may be helpful.

The selling price is composed of the purchase price (=$150), plus a markup that is 40 percent of itself. From this, we learn that the purchase price is the remaining 60 percent of the selling price. Say that out loud:

$150 is 60 percent of the selling price.

From here we can find the selling price itself: if $150 is 60 percent, then 10% of the selling price is 150/6 = 25, and the selling price will therefore equal 10 × 10%, or 10 times $25 = $250. The dealer will make $250-150 = $100 on the sale.

The correct answer is E.

Main Takeaways:

1) ALWAYS ascertain what a percentage is taken FROM – what is the WHOLE. Is it the selling price? The purchase price? Something else?

2) Use bar charts to visualize the information given. The selling price is made of two “boxes”, the $150 and the 40%. Put the information together, and see what you can learn.

3) On a broader note, the GMAT is not supposed to present you with stupid questions. The adaptive algorithm means that you will be presented with questions at your level and upwards. If you just burned through a question in under a minute, it is possible that this question is too easy for you, but it is far more likely that you missed something crucial. Won’t you spend an extra 20-30 seconds making 100% sure?

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