



 
Hi Anis, Selling price, $SP$ is made up of two parts, cost $C$ and profit $P.$ \[SP = C + P\] If the profit is to be 20% of the cost then $P = 0.20 C$ and you get your option 1) above, \[SP = C + 0.20 C.\] The other expression $SP = \frac{C}{0.80}$ can be rewritten by multiplying both sides by $0.80$ to obtain \[C = 0.80 SP\] so the cost is 80% of the selling price. Hence the remaining 20% of the selling price is the profit. Thus in 1) the profit is 20% of the cost and in 2) the profit is 20% of the selling price. I hope this helps,  


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