Service costing

In icai material has 6 th illustration was the equation have 2641000+25%(5%+20%) of total taking .. I not understand the logic reason behind it...for the equation..

Answers (2)

In the given equation, 2641000 is the total of all the expenses including building rent (Building rent is Rs.1,20,000 and other expenses Rs.25,21,000) Coming to 25%, 5% is the additional amount payable apart from the monthly rent to the building taken on hire and 20% is the profit to be received in the business. So the total amount receivable by renting the rooms to maintain the profit will be Rs.26,41,000 + (25% of rent received). This will be the amount to be received by renting the rooms. Since we do not know the room rent's, we take 1,04,400 (as per working note 1 in the solution) x R (assumed rent) = Rs.26,41,000 + (25% x 1,04,400 R (Total rent received)).