qlx wrote:

A dairyman pays Rs. 6.40 per liter of milk. He adds water and sells the mixture at Rs. 8per liter, thereby making 37.5% profit. The proportion of water to milk received by the customers is

(a) 1:10

(b) 1:12

(c) 1:15

(d) 1:20

(e) 1:25

You can reason it out like this:

Selling price is Rs 8 per liter with a profit of 37.5% (which is 3/8) of Cost Price.

Cost Price*(1 + 3/8) = 8

Cost Price = 64/11

So for every liter he sells, he uses only Rs. 64/11 worth of milk.

In Rs 6.4, you get 1 lt of milk

In Rs 64/11 you get 64/(11*6.4) = 10/11 lts of milk

Since he uses only 10/11 lts of milk, he must be putting 1/11 lts of water in it.

So water:milk = 1:10

Karishma - Can you please confirm whether the GMAT officially defines profit margin this way? In the U.S. financial services industry, profit margin is uniformly calculated as a percent of revenue (i.e. (Revenue - Cost) / Revenue). Hence, 37.5% profit margin would be 37.5% of $8 sales price, as opposed to $8 = Cost Price * (1+37.5%). Just want to make sure this is an official GMAT definition and not a cultural difference as I noticed the problem was written with Rs. being the currency. Thanks!