A retailer buys a radio for Rs. 225, incurs overhead expenses of Rs. 15 and sells the radio for Rs. 300; what is his percentage profit on the effective cost price?

Introduction / Context:
This question tests the understanding of effective cost price when overhead expenses are involved. A retailer not only pays the purchase price of an item but also additional expenses such as packing, transport or local handling. These extra costs must be added to the basic cost to get the true cost price. The profit percentage is then calculated using this combined cost price and the final selling price.

Given Data / Assumptions:

• Basic cost price of the radio = Rs. 225.
• Overhead expenses (for example, transport, shop expenses) = Rs. 15.
• Final selling price of the radio = Rs. 300.
• No other hidden costs or taxes are given.
• We need to calculate the profit percentage based on total cost.

Concept / Approach:
The total cost price (effective CP) is the sum of the basic purchase cost and the overhead expenses. Profit is the difference between selling price and this effective cost price. Once the profit amount is known, profit percentage is calculated using the formula: Profit percentage = (Profit / Cost price) * 100. The entire computation focuses on correctly identifying the cost base, which includes both the radio price and overhead expenses.

Step-by-Step Solution:
Step 1: Basic cost price of the radio = Rs. 225.Step 2: Overhead expenses = Rs. 15.Step 3: Effective cost price (CP) = 225 + 15 = Rs. 240.Step 4: Selling price (SP) of the radio = Rs. 300.Step 5: Profit = SP - CP = 300 - 240 = Rs. 60.Step 6: Profit percentage = (Profit / CP) * 100.Step 7: Substitute the values: Profit percentage = (60 / 240) * 100.Step 8: Simplify 60 / 240 = 1 / 4.Step 9: Hence profit percentage = (1 / 4) * 100 = 25%.

Verification / Alternative check:
We can check quickly by using the idea that a 25% profit means the selling price is 125% of the cost price. If the cost price is Rs. 240, then 125% of 240 is 240 * 1.25 = 300. Since the given selling price is exactly Rs. 300, the calculation aligns perfectly with a 25% profit, confirming the result.

Why Other Options Are Wrong:

• 10%: A 10% profit on Rs. 240 would be Rs. 24, giving a selling price of Rs. 264, which is far less than Rs. 300.
• 50%: A 50% profit on Rs. 240 would mean a profit of Rs. 120 and a selling price of Rs. 360, which does not match the data.
• 52%: This is just a distractor and does not correspond to any correct calculation based on the given values.

Common Pitfalls:

• Computing profit percentage using only the basic purchase price of Rs. 225, ignoring the Rs. 15 overhead, which overstates the profit percentage.
• Accidentally subtracting overhead costs from selling price rather than adding them to the cost price.
• Making arithmetic mistakes when simplifying the fraction 60 / 240.

Final Answer:
The retailer makes a profit of 25% on the effective cost price of the radio.