Capital Employed in a partnership firm is ₹50,00,000. Its average profit is ₹6,00,000. The normal rate of return in similar type of business is 10%. The amount of super profit is:
Answer & explanation
Correct answer: option 4
The correct answer is option 4- ₹1,00,000.
Normal profit = Capital employed x Normal rate of return/100
= 50,00,000 x 10/100
= 5,00,000
Average profit = 6,00,000
Super profit = Average profit - Normal profit
= 6,00,000 - 5,00,000
= 1,00,000