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A dairyman pays Rs. 6.4 per litre for milk. He adds water and sells the mixture at Rs. 8 per liter, thereby making 37.5% profit. The ratio of water to milk received by the customer is:
  • a)
    1:5
  • b)
    1:10
  • c)
    1:20
  • d)
    1:12
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
A dairyman pays Rs. 6.4 per litre for milk. He adds water and sells th...
Let the quantity of milk purchased be x litres and quantity of water added to it be y litres.
Then ratio of water to milk will be y:x.
Now, CP of x litres milk = Rs. 6.4x and
S.P of the mixture when y litres of water is added to x litres of milk = Rs. 8(x + y)
And profit percent = 37.5%
Now, SP = CP × (100 + Profit%)
So, 8 (x + y) = 6.4x × (100 + 37.5)/100
Or 8x + 8y = 8.8x
Or 8y = 0.8x
Or x/y = 80/8 = 10/1
Or y:x  = 1:10
Hence, option (b) is correct. 
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Community Answer
A dairyman pays Rs. 6.4 per litre for milk. He adds water and sells th...
Given Data:
- Cost price of milk = Rs. 6.4 per liter
- Selling price of the mixture = Rs. 8 per liter
- Profit margin = 37.5%

Solution:

Step 1: Calculate the selling price of milk
Let the cost price of 1 liter of milk be Rs. x
As the dairyman sells the mixture at Rs. 8 per liter, he must be selling 1 liter of milk for Rs. 6.4 (since he mixes it with water)
According to the question, the dairyman makes a profit of 37.5% on the selling price.
Therefore, the selling price of milk = cost price of milk + 37.5% of cost price of milk
Selling price of milk = x + 0.375x = 1.375x
Given that selling price of milk is Rs. 6.4
1.375x = 6.4
x = 6.4 / 1.375
x = 4.65
So, the dairyman buys 1 liter of milk for Rs. 4.65.

Step 2: Calculate the cost of water added
Cost of 1 liter of water = Cost of selling price of mixture - Cost of 1 liter of milk
Cost of 1 liter of water = Rs. 8 - Rs. 4.65
Cost of 1 liter of water = Rs. 3.35

Step 3: Calculate the ratio of water to milk
Ratio of water to milk = Cost of water / Cost of milk
Ratio of water to milk = Rs. 3.35 / Rs. 4.65
Ratio of water to milk = 1:10
Therefore, the ratio of water to milk received by the customer is 1:10. Option B is the correct answer.
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You are the newly appointed financial controller in LMB Ltd., a large private engineering company. This is your first appointment in industry having undertaken your training at a large accountancy firm where most of your experience was gained in the audit of large NSE 500 clients. LMB Ltd. makes components which are used in the manufacture of various household products and it has a wide customer base from large household names through to small local private businesses.One of your first tasks is to undertake a view of aged debtors. Whilst undertaking your review you find that a small number of customers have credit balances on their sales ledger accounts. The amounts relate to invoices which are now over 9 months old and which appear to have been paid twice. You find this odd and decide to raise the issue with your boss, Dushyant, the Financial Director, at your next meeting.The following morning, Dushyant calls you into his office and asks you how you are settling into your position. You respond that, although you are still finding your feet, you have been making a major effort to get up to speed with the companys business and systems and controls. Dushyant appreciates your enthusiasm and is pleased that he has managed to recruit someone so enthusiastic.Dushyant then asks whether anything has come to your attention so far. You advise him of what you have found in relation to the customers who appear to have paid twice. Dushyant laughs and tells you that it balances out in the end.Furthermore, he produces copies of letters from a file which are addressed to the Financial Directors at the respective customers informing them of their companys overpayment. You return to your desk - rather bewildered by his comments. Customers have overpaid and he knows this to be the case, yet he has no intention of returning their money unless prompted by the customer.You find it perplexing to think that the Financial Directors of the companies that have overpaid have not responded on being notified about the outstanding invoices.Q. A couple of months pass when, whilst undertaking another review, you notice that a customer, Moe Controls Ltd., has once again paid the amount due by them twice. You decide to discuss this with Dushyant with a view to issuing an immediate repayment or at the very least, a credit note, as the company is a regular customer. Dushyant advises you that he will deal with this by personally writing to the Financial Director at Moe Controls Ltd. - he advises you that at this stage there is no need to issue a credit note or make a repayment.You are not at ease with his assurance, you decide to

Group QuestionThe passage given below is followed by a set of questions. Choose the most appropriate answer to each question.You are the newly appointed financial controller in LMB Ltd., a large private engineering company. This is your first appointment in industry having undertaken your training at a large accountancy firm where most of your experience was gained in the audit of large NSE 500 clients. LMB Ltd. makes components which are used in the manufacture of various household products and it has a wide customer base from large household names through to small local private businesses.One of your first tasks is to undertake a view of aged debtors. Whilst undertaking your review you find that a small number of customers have credit balances on their sales ledger accounts. The amounts relate to invoices which are now over 9 months old and which appear to have been paid twice. You find this odd and decide to raise the issue with your boss, Dushyant, the Financial Director, at your next meeting.The following morning, Dushyant calls you into his office and asks you how you are settling into your position. You respond that, although you are still finding your feet, you have been making a major effort to get up to speed with the companys business and systems and controls. Dushyant appreciates your enthusiasm and is pleased that he has managed to recruit someone so enthusiastic.Dushyant then asks whether anything has come to your attention so far. You advise him of what you have found in relation to the customers who appear to have paid twice. Dushyant laughs and tells you that it balances out in the end.Furthermore, he produces copies of letters from a file which are addressed to the Financial Directors at the respective customers informing them of their companys overpayment. You return to your desk - rather bewildered by his comments. Customers have overpaid and he knows this to be the case, yet he has no intention of returning their money unless prompted by the customer.You find it perplexing to think that the Financial Directors of the companies that have overpaid have not responded on being notified about the outstanding invoices.Q. In the light of the given situation, which of the following is the most sound judgment?

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A dairyman pays Rs. 6.4 per litre for milk. He adds water and sells the mixture at Rs. 8 per liter, thereby making 37.5% profit. The ratio of water to milk received by the customer is:a)1:5b)1:10c)1:20d)1:12Correct answer is option 'B'. Can you explain this answer?
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