Multiple choice

A purchased goods for Rs$2,00,000$. B sold the goods for Rs$2,80,000$. Unused materials of Rs$10,000$ taken over by A at Rs$8,000$. A is entitled $1\%$ commission on purchase. B is entitled $2\%$ commission on sales. Profit sharing ratio is equal. A's share of profit on venture will be:

  1. Rs$40,000$
  2. Rs$40,400$
  3. Rs$40,600$
  4. Rs$40,200$
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Total sales = 2,80,000 + 8,000 (value of goods taken by A) = 2,88,000. Total costs = 2,00,000 (purchase) + 2,000 (1% of 2L commission for A) + 5,600 (2% of 2.8L commission for B) = 2,07,600. Total profit = 2,88,000 - 2,07,600 = 80,400. A's share is half of 80,400, which is 40,200.

AI explanation

The venture profit is calculated by subtracting the cost of goods and commissions from the total sales and adding the value of materials taken over. A's commission is 1% of Rs 2,00,000 which is Rs 2,000, B's commission is 2% of Rs 2,80,000 which is Rs 5,600, and the cost of goods is Rs 2,00,000. The total profit equals Rs 2,80,000 plus Rs 8,000 for materials taken minus Rs 2,00,000 minus Rs 2,000 minus Rs 5,600, resulting in Rs 80,400. Because the profit sharing ratio is equal, A's share of the profit is half of Rs 80,400, which is Rs 40,200.

Keep practicing — related questions