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If the capital employed is ₹400,000 and the normal rate of return is 10%, what will be the normal profit?

Answer and explanation

Correct answer: ₹40,000

Normal profit = Capital employed × Normal rate of return = ₹400,000 × 10/100 = ₹40,000. Therefore, option B is correct. ₹20,000 would represent only a 5% return on the given capital, not 10%. Exam tip: To calculate normal profit, multiply the capital employed by the normal rate of return.

Related tags

Normal ProfitGoodwill AccountingCapital EmployedRate Of ReturnNumerical QuestionReconstitution Admission Of A PartnerAccountancyClass 12 Mcq

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