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If B's commission is calculated on profit after charging commission, and the commission must be deducted from profit, which formula expresses the correct calculation?

Answer and explanation

Correct answer: Profit × Rate ÷ (100 + Rate)

The governing concept is commission calculated after charging the commission itself. Let P denote profit before this commission, C denote the commission, and r denote the rate in percent. Since the commission is based on profit remaining after deducting C, the relationship is C = r/100 × (P − C). Multiplying by 100 and rearranging gives 100C = rP − rC, so C(100 + r) = rP. Consequently, C = P × r/(100 + r), which is the formula in option A. Option B, P × r/100, applies when commission is calculated before charging commission. Options C and D do not express a valid percentage relationship and generally give incorrect amounts. Therefore option A is correct.

Related tags

Commission FormulaAfter Charging CommissionProfit AppropriationProfit DistributionPartnership AccountsPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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