Question

Capital employed by a partnership firm is Rs. 5,00,000/-. Its average profit is Rs.60,000/-. The normal rate of return is 10%. The amount of super profit is *
Rs.50,000/-
Rs.10,000/-
Rs.6,000/-
Rs.56,000/-

Answer 1

The amount of super profit is Rs.10,000/-.

Step-by-step explanation:

We are given that capital employed by a partnership firm is Rs. 5,00,000/-. Its average profit is Rs.60,000/-. The normal rate of return is 10%.

As we know that the formula for finding super profit is given by;

Super profit = Average profit - Normal profit

In the question, we are not given the normal profit but we know the normal rate of return (10%).

So,  Normal profit  =  Capital employed $\times$ Normal rate of return

                               =  $5,00,000 \times \frac{10}{100}$

                               =  Rs 50,000

Now, Super profit =  Average profit - Normal profit

                              =  Rs 60,000 - Rs 50,000

                              =  Rs 10,000