answer is Rs.416667 which is none of the options...
coming to the explanation, by mathematicaal logic if the profit on cost is 1/5th (20%) then the profit on invoice value be 1/6th (16.67%). or if the profit on cost is 1/4th(25%) then the profit on invoice will be 1/5th (20%) simply add or less 1 from the denominotor to get profit on invoice or profit on cost respectively when they give the other.
so 500000 is invoice price and deduct 1/6th of its value from 500000 which u will get 416667.
if u dont want logic then there is another way which is option method.
as we know the cost price will be in one of the options given we just have to verify it by adding 20% of its value which should give invoice value. [C+P=IP]
1) 600000. now add 20% of 600000 to it then u get 720000 which is not the invoice price given
2) 500000. do as above then u will get 600000 which is also not
3) 400000. add 20% to it then u get 480000 which is not either
then obviously the answer wud be last option.
this option method is time saving one and former method shows you the exact value and the logic behind this. it is just to be aware of it. ultimately u have to do option method in the exam to save time.
in the first method i did not tel you the logic behind adding or deducting one from the denominator. its purely mathematical. if u wish to know then comment the same. i will let you know even that.
all the best!
it is also simple...use this equation [C+P=IP]
in the given question let us assume cost is 100 then the loading involved is 20% which is 20
now by c+p=ip 100+20=120. now ip is given and profit on cost is given so 120-20= 100(c)
20 is 1/6th of 120(IP) and 1/5th of 100(CP)
now let us take this 75+25=100
here 25 is 1/3rd of 75(CP) and 1/4th of 100(IP)
so by this we come to conclusion that if the profit involved in cost price is 1/4th then the profit involved in invoice price will be 1/5th.
i hope u understand.
CAclubindia
