[RESOLVED] Help (explain!?)

[Yunie]

Tom sold a watch to Dick at a profit of 20% and Dick sold it to Harry at a profit of 30%. If Harry paid $780 for the watch, calculate how much Tom paid for the watch.


The working solutions:

Dick paid $ (100/130 * $780) = $600 for the watch

Hence, Tom paid $ (100/120 * $600) = $500

I don't understand why the workings are done in that way...Could someone clear my doubt by explaining the above solutions? You could even explain and do the questions using your own method...Thanks..

[03myersd]

If Tom sells the watch to Dick at a profit of 20% then it means that Dick bought the watch at 120% of its value. Likewise Harry paid 130% of the value that Dick thought it worth.

Harry payed $780. You know that Dick must have paid less that this. What we now need to know is what the 100% of 130% is. We do this by dividing 100 by 130. This give the percentage of $780 that Dick paid. Which is $600.

We then repeat this process to get what Tom paid. Using 100/120 * 600 = $500

Hope this explains it?

[Yunie]

Thanks O3myersd! I understood the question!

So, that means when doing this type of question, we have to so-called work backwards right (in this case the amount that Harry paid is provided) ?

Thanks again.

[triggernum5]

If you were to multiply by (100%-markup) then you would be adding an incorrect step, rather than undoing a step using its inverse function..
Heres an example I remember from Square One TV..
I sell you my lemonade stand with an estimated value of $100 at a 20% markup for $120..
You decide to sell it back, saying you simply want to undo the sale.. You paid $120, at a 20% markup, so you decide to mark your cost down by 20%..
($120*80%=$96)..
Business markup tutorials are probably the best source for in depth discussion on it..

[03myersd]

So, that means when doing this type of question, we have to so-called work backwards right (in this case the amount that Harry paid is provided) ?

More or less, yep!

[Yunie]

Thanks guys!