When the cost of an article was decreased by 7%, the number of articles sold was increased by 20%. What was the effect (in percentage) on the revenue?
- AOption (a)
increase of 10.4%
- BOption (b)
decrease of 9.6%
- COption (c)
increase of 11.6%
- DOption (d)
decrease of 10.6%
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Correct answer
increase of 11.6%
Why this answer is correct
Shortcut Trick
Apply the Successive Percentage formula: Net Change = a + b + (a × b ÷ 100)
Here, a = −7 (decrease in cost) and b = +20 (increase in sales).
Net Change = −7 + 20 + [(−7 × 20) ÷ 100]
Net Change = 13 − 1.4 = 11.6%
Since the result is positive, it indicates an increase.
∴ The correct answer is increase of 11.6%.
Alternate Method
Given: Decrease in cost = 7% | Increase in sales = 20%
Formula Used: Revenue = Price × Quantity
⇒ Let the initial cost of one article be 100 units.
⇒ Let the initial number of articles sold be 100 units.
⇒ Initial Revenue = 100 × 100 = 10,000
⇒ New cost = 100 − 7% of 100 = 93
⇒ New number of articles sold = 100 + 20% of 100 = 120
⇒ New Revenue = 93 × 120 = 11,160
⇒ Increase in Revenue = 11,160 − 10,000 = 1,160
⇒ Percentage Increase = (1,160 ÷ 10,000) × 100 = 11.6%
∴ The correct answer is increase of 11.6%.
Additional Information
Net Percentage Change Formula
For any product P = A × B, if A changes by x% and B changes by y%, then P changes by (x + y + xy/100)%.
Revenue Components
Total Revenue is directly proportional to both Price per unit and Total Sales volume.
Fraction Method
Changes can be expressed as multipliers: 7% decrease = 0.93 multiplier; 20% increase = 1.20 multiplier. Net change = 0.93 × 1.20 = 1.116, which is an 11.6% increase.