Question : On a certain item profit is 150%. If the cost price increases by 25%, what will be the new profit margin (in %)?
Option 1: 25
Option 2: 50
Option 3: 100
Option 4: 75
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Correct Answer: 100
Solution :
Let the initial cost price (CP) of the item be Rs. 100.
Given that the profit is 150%.
The selling price (SP),
SP = 100 + $\frac{150}{100}$ × 100 = Rs. 250
Now, if the cost price increases by 25%.
The new cost price = CP + $\frac{25}{100}$ × CP = 100 + 0.25 × 100 = Rs. 125
Assuming the selling price remains the same.
The new profit = Rs. 250 – Rs. 125 = Rs. 125
The net profit margin = $\frac{125}{125}$ × 100 = 100%
Hence, the correct answer is 100.
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