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A dairyman pays Rs. 6.40 per liter of milk. He adds water

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Re: A dairyman pays Rs. 6.40 per liter of milk. He adds water [#permalink]

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New post 24 May 2017, 03:36
jy295 wrote:
VeritasPrepKarishma wrote:
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!


As far as I know, profit margin is universally calculated as a percent of revenue.
This question gives you profit as a percentage, not profit margin.
Profit in percentage terms will be on Cost.
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Re: A dairyman pays Rs. 6.40 per liter of milk. He adds water [#permalink]

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New post 11 Jan 2018, 15:29
Hi All,

This question can be approached in a couple of different ways, depending on how you 'see' the math involved.

We're told that milk is purchased for Rs 6.40/liter, mixed with some water, then the mixture is resold at Rs 8/liter. We're told that this process leads to a 37.5% profit.

37.5% = 3/8, so we're looking for total revenue that is Rs 6.40 + (3/8)(Rs 6.40)....

1/8 of Rs 6.40 = Rs 0.80, so....
3/8 of Rs 6.40 = Rs 2.40

Thus, that one liter of milk (and whatever water is mixed in) has to generate Rs 6.40 + Rs 2.40 = Rs 8.80 of revenue.

Comparing Rs 8 and Rs 8.80, you'll notice that the second number is exactly 10% greater than the first number. Thus, the amount of water that we need to add must be 10% of the volume of milk. A ratio of water:milk of 1:10 is needed.

Final Answer:
[Reveal] Spoiler:
A


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Re: A dairyman pays Rs. 6.40 per liter of milk. He adds water   [#permalink] 11 Jan 2018, 15:29

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