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If the average profit is ₹90,000, the capital employed is ₹5,00,000, and the normal rate of return is 12%, what is the super profit?

Answer and explanation

Correct answer: ₹30,000

Normal profit = Capital employed × Normal rate of return = ₹5,00,000 × 12% = ₹60,000. Super profit = Average profit − Normal profit = ₹90,000 − ₹60,000 = ₹30,000. ₹60,000 is the normal profit, not the super profit. Exam tip: Calculate normal profit first and subtract it from the average profit.

Related tags

Super ProfitNormal ProfitRate Of ReturnGoodwill AccountingReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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