Question

Ram and Shyam form a partnership (with Shyam as working partner) and start a business by investing 4000 and 6000 respectively. The conditions of partnership were as follows:

In case of profits till 200,000 per annum, profits would be shared in the ratio of the invested capital.
Profits from 200,001 till 400,000 Shyam would take 20% out of the profit, before the division of remaining profits, which will then be based on ratio of invested capital.
Profits in excess of 400,000, Shyam would take 35% out of the profits beyond 400,000, before the division of remaining profits, which will then be based on ratio of invested capital.

If Shyam's share in a particular year was 367000, which option indicates the total business profit (in rupees) for that year?

Accepted Answer

D. Capital ratio Ram:Shyam = $4000:6000 = 2:3$. Shyam's share on first 200,000 = $200,000 	imes 60\% = 120,000$. On next 200,000 (from 200k to 400k): Shyam gets $20\% + 80\% 	imes 60\% = 20\% + 48\% = 68\% \implies 200,000 	imes 68\% = 136,000$. Total Shyam's share from first 400k = $120,000 + 136,000 = 256,000$. Remaining Shyam's share needed = $367,000 - 256,000 = 111,000$. On profit above 400,000 (let extra profit be $x$): Shyam gets $35\% + 65\% 	imes 60\% = 35\% + 39\% = 74\%$. $0.74 x = 111,000 \implies x = 150,000$. Total profit = $400,000 + 150,000 = 550,000$.

Ram and Shyam Profit Sharing Partnership

Explanation

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