Profit on sale %=20%,profit on cost %=25% profit on sale
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Explanation:
Whenever you get confused do the following. I still use this even after qualifying CA.
20%= 20/100 that's 1/5
Whenever it's on sales and you want to convert into cost, reduce one from the denominator so 1/5 on sales becomes 1/4 which will be on cost. This is a shortcut. Do the vice versa when you want to convert from cost to sale i.e add one in the denominator.
The logic is as follows:-let cost of a product X be 100
Cost + profit= sale price
Now we have to have consider 25%profit on cost. So 100+25%of100= sale price. Which is nothing but 100+25=125.
Now in your question you have 20% on sale
Rs 25 profit on 125 is nothing but 20% on sale
Hence proved 25%on cost=20% on sale!
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