The accounts of a company show sales of Rs. 12,600. The primary cost is 35% of sales and trading cost accounts for 25% of the gross profit. Gross profit is arrived at by excluding the primary cost plus the cost of advertising expenses of Rs. 1400, director’s salary of Rs. 650 per annum plus 2% of annual sales as miscellaneous costs. Find the percentage profit (approx.) on a capital investment of Rs. 14,000?

Options

A. 0.35
B. 0.31
C. 0.28
D. Cannot be determined

Answer

To solve the problem step by step, we will follow the calculations as described in the video transcript.

### Step 1: Calculate the Primary Cost
The primary cost is given as 35% of sales.

- **Sales** = Rs 12,600
- **Primary Cost** = 35% of Sales = \( 0.35 \times 12,600 = 4,410 \)

### Step 2: Calculate the Miscellaneous Cost
The miscellaneous cost is given as 2% of sales.

- **Miscellaneous Cost** = 2% of Sales = \( 0.02 \times 12,600 = 252 \)

### Step 3: Calculate Total Costs Excluded from Gross Profit
We need to consider the advertising expenses, director’s salary, and miscellaneous costs to find the gross profit.

- **Advertising Expenses** = Rs 1,400
- **Director’s Salary** = Rs 650
- **Total Costs Excluded from Gross Profit** = Primary Cost + Advertising Expenses + Director’s Salary + Miscellaneous Cost

Calculating this:
- Total Costs = \( 4,410 + 1,400 + 650 + 252 = 6,712 \)

### Step 4: Calculate Gross Profit
Gross Profit can be calculated as:

- **Gross Profit** = Sales - Total Costs
- Gross Profit = \( 12,600 - 6,712 = 5,888 \)

### Step 5: Calculate Trading Cost
The trading cost is 25% of the gross profit.

- **Trading Cost** = 25% of Gross Profit = \( 0.25 \times 5,888 = 1,472 \)

### Step 6: Calculate Net Profit
Net Profit is calculated by subtracting the trading cost from the gross profit.

- **Net Profit** = Gross Profit - Trading Cost
- Net Profit = \( 5,888 - 1,472 = 4,416 \)

### Step 7: Calculate Percentage Profit
The percentage profit is calculated based on the capital investment.

- **Capital Investment** = Rs 14,000
- **Percentage Profit** = \( \left( \frac{\text{Net Profit}}{\text{Capital Investment}} \right) \times 100 \)
- Percentage Profit = \( \left( \frac{4,416}{14,000} \right) \times 100 \approx 31.54\% \)

### Step 8: Approximate the Percentage Profit
The question asks for the approximate percentage profit. Rounding 31.54% gives us approximately 31%.

### Final Answer
The approximate percentage profit on a capital investment of Rs 14,000 is **31%**.

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