"A Retail Appliance Store Priced a Video Recorder at 20% Above the Wholesale Cost..." — GMAT® Worked Solution

Source: Official Guide for GMAT® Review, 11th Edition

A retail appliance store priced a video recorder at 20% above the wholesale cost of $200. If a store employee applied the 10% employee discount to the retail price to buy the recorder, how much did the employee pay for the recorder?

(A) $198

(B) $216

(C) $220

(D) $230

(E) $240

Try it before reading on.

Setting Up the Problem

Start with the foundation: write what's given and what's asked.

• Given: wholesale cost is $200; retail price is 20% above cost; employee gets 10% discount off retail
• Asked: how much did the employee pay?

This problem involves a comparison — cost versus retail price versus discounted price. That's a good signal to use columns, even though the math is straightforward.

Fill in what you know. Leave blanks where you need to calculate.

Step 1: Calculate the Retail Price

The retail price is 20% above the wholesale cost of $200.

Using fractions instead of decimals:

$\text{Retail Price} = \frac{120}{100} \times 200$

Write it as a fraction multiplication so you can cancel before multiplying:

$\frac{120}{100} \times \frac{200}{1}$

Cancel the zeros. 100 and 200 share two zeros:

$\frac{120}{1} \times \frac{2}{1} = 120 \times 2 = 240$

The retail price is $240.

Update the chart:

Step 2: Apply the Employee Discount

The employee gets a 10% discount off the retail price.

There are two ways to compute this:

Option A: Calculate 90% of the retail price (the fraction approach).

$\frac{90}{100} \times 240$

Option B: Calculate 10% of the retail price and subtract.

10% of 240 is 24. Subtract: $240 - 24 = 216$.

Both methods work. Option B is slightly easier here because 10% of any number is just moving the decimal one place to the left. For 90%, the fraction multiplication is clean but requires a bit more work.

Use whichever is faster for the specific numbers in front of you. On this problem, Option B saves a step.

The employee pays $216.

Final chart:

The answer is (B).

Why This Problem Matters

This is a warm-up — most test takers get it right. The math isn't complex, and there's no major trap answer pulling people toward a wrong option.

But the problem is worth doing carefully because it introduces two habits that scale up to harder percent word problems:

The fraction habit

Writing $\frac{120}{100} \times \frac{200}{1}$ instead of $1.2 \times 200$ seems like extra work on a problem this simple. And it's — here. On a harder problem, where the numbers are less clean and the computation has more steps, the fraction method prevents the dropped zeros and misaligned decimals that cost points. Building the habit on easy problems means it's already in place when the stakes are higher.

The column habit

Using columns for cost, retail price, and discounted price organizes the information visually. On this problem, you could hold all three numbers in your head. On a problem with multiple items, multiple discounts, or variables instead of numbers, the same column structure keeps everything visible and prevents mixing up which price goes where.

The combination — fractions for computation, columns for organization — handles most percent word problem setups on the GMAT®. The problems get harder. The system stays the same.

One additional note: memorizing times tables through 20 rather than just through 10 or 12 saves time on problems like this. Knowing that $12 \times 20 = 240$ from memory eliminates the need for long multiplication. It's not essential, but it helps — and the confidence boost of recognizing a product instantly can help with momentum during the exam.

Want the full strategy behind this problem? Read: GMAT® Percent Word Problems: The Fraction System That Prevents Computation Errors

From Episode 36 of Real GMAT® Problems (The GMAT® Strategy Podcast).