To find the original cost of the shirt

Let the original cost be x

The markup percentage is 25%, which means the store is selling the shirt for 100% + 25% = 125% of the original cost.
So now the equation is
x + 25% of x = $40

We can write 25% as 0.25

So, x + 0.25x = $40

1.25x = $40

x = $40 / 1.25

x = $32

Therefore, the original cost of the shirt was $32.

So, the correct answer is option c)$32.