Hidden goodwill at the time of admission of a partner is calculated by comparing:
A. Total capital based on new partner's share and actual total capital of all partners
B. Assets and outside liabilities
C. Super profit and normal rate of return
D. Average profits of last 5 years
Answer: Option A
Solution (By JKSSB Mock Tests)
Hidden goodwill is the excess of the firm's inferred total capital (based on the new partner's contribution and share) over the actual combined capital balances.
Explanation:
Marginal cost represents the total variable cost of production, which is Prime Cost (Direct Material + Direct Labor + Direct Expenses) plus Variable Overheads. It strictly excludes fixed overheads. S1 is correct, S2 is incorrect.
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