In this question, the retailer's profit or loss as a percentage doesn't hinge on the $30 directly. He ends up selling 80% at 120% of the cost, the question asks us to assume. And he gets 40% of the cost as a refund on the other 20%.
So, for the revenue, we can consider the cost 1 and construct a weighted average:
revenue= ( 0.8 )( 1.2 )+( 0.2 )( 0.4 )
The "cost" is just 1, so the dealer has made a 4% profit.
The correct answer is (C).