Question

Neelam bought a box for Rs. 3500 and sold to Neeta. Neeta in turns sold it to Jeena. Both Neelam and Neeta made 20% profit. Which one of the flowing is true?

• A. Neelam and Neeta earn the same profit
• B. Neelam earned more profit than Neeta
• C. Neelam earned less profit than Neeta
• D. Cannot be determined

Hint:

Without performing the full calculation: since both made a $20\%$ profit, and Neeta bought the item at a higher price than Neelam, Neeta's absolute profit must be larger. Thus, Neelam earned less profit than Neeta.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
Profit in commercial transactions is calculated as a percentage of the purchase price (Cost Price, CP).
When an item is sold successively through multiple transactions, the selling price (SP) of the first seller becomes the cost price (CP) for the next buyer.
If both sellers make the same percentage profit, the seller with the higher cost base will earn a larger absolute profit.
Key Formula or Approach:
The formula for profit value and selling price is: \[ \text{Profit} = \text{Cost Price (CP)} \times \left(\frac{\text{Profit Percentage}}{100}\right) \] \[ \text{Selling Price (SP)} = \text{Cost Price (CP)} + \text{Profit} \]

Step 2: Detailed Explanation:
Let us calculate the profits for both transactions step-by-step:
1. Neelam's Transaction:
- Neelam's Cost Price ($\text{CP}_1$) $= \text{Rs. } 3500$
- Neelam's Profit Percentage $= 20\%$
- Calculate Neelam's profit: \[ \text{Profit}_{\text{Neelam}} = 3500 \times \frac{20}{100} = \text{Rs. } 700 \] - Calculate Neelam's Selling Price ($\text{SP}_1$): \[ \text{SP}_1 = 3500 + 700 = \text{Rs. } 4200 \] 2. Neeta's Transaction:
- Neelam's selling price becomes Neeta's purchase price.
- Neeta's Cost Price ($\text{CP}_2$) $= \text{Rs. } 4200$
- Neeta's Profit Percentage $= 20\%$
- Calculate Neeta's profit: \[ \text{Profit}_{\text{Neeta}} = 4200 \times \frac{20}{100} = \text{Rs. } 840 \] 3. Comparing the Profits:
- Neelam's Profit $= \text{Rs. } 700$
- Neeta's Profit $= \text{Rs. } 840$
Since $\text{Rs. } 700 < \text{Rs. } 840$, Neelam earned less profit than Neeta.
This is because Neeta's cost base ($\text{Rs. } 4200$) was larger than Neelam's cost base ($\text{Rs. } 3500$).

Step 3: Final Answer:
Neelam earned less profit than Neeta.
Therefore, the correct option is (C).