Calculation of Super Profit

To calculate the Super Profit, we need to first calculate the Normal Profit. Normal Profit is the minimum profit required to cover the opportunity cost of the capital employed. In this case, the Normal Rate of Return is 10% of Rs 5,00,000, which is Rs 50,000.

So, Normal Profit = Normal Rate of Return * Capital Employed = 10% * Rs 5,00,000 = Rs 50,000

Next, we need to calculate the Super Profit, which is the excess profit earned over and above the Normal Profit. In this case, the Average Net Profit earned is Rs 65,000.

So, Super Profit = Average Net Profit - Normal Profit = Rs 65,000 - Rs 50,000 = Rs 15,000

Therefore, the Super Profit earned by the business is Rs 15,000.

Explanation of Super Profit

Super Profit is the profit earned by a business over and above the minimum profit required to cover the opportunity cost of the capital employed. It is an indicator of the efficiency and effectiveness of the business in utilizing its resources to generate profits.

In this case, the Normal Profit is Rs 50,000, which is the minimum profit required to cover the opportunity cost of the capital employed. The Average Net Profit earned by the business is Rs 65,000, which is higher than the Normal Profit. This indicates that the business is making efficient use of its resources to generate profits.

The Super Profit of Rs 15,000 indicates the excess profit earned by the business over and above the Normal Profit. This can be used by the business for expansion, investment in new projects, or distribution to shareholders as dividends.

Overall, the Super Profit earned by a business is an important indicator of its financial health and performance.