Discussion
In order that there may be a profit of 20% after allowing a discount of 40% on the marked price, the marked price of an article must be above its cost price by:
Answer: D
Let the cost price be 100 and the marked price be \( M \). After a 40% discount the seller must still make 20% profit.
\[ M \times (1 - 0.40) = 100 \times 1.20 \]
\[ 0.6M = 120 \quad\Longrightarrow\quad M = 200 \]
\[ \text{increase over cost price} = \frac{200 - 100}{100} \times 100 = 100\% \]
So the article must be marked at double its cost. Adding 20% and 40% to get 60% is the trap: the discount is taken off the marked price while the profit is measured on the cost price, so the two percentages act on different bases.
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