Kosher Pickle Company acquires all the outstanding stock of Midwest Produce for $19 million. The fair value of Midwest's assets is $14.3 million. The fair value of Midwest's liabilities is $2.5 million. Calculate the amount paid for goodwill.

Solution :

Goodwill amount arises when an organization is purchased by another organization.

Goodwill can be calculated by :

Goodwill amount = consideration paid - the fair value of the total identifiable assets.

Here the paid consideration is = $ 19 million

The fair value of the total identifiable assets = assets of Midwest - liabilities of Midwest.

The fair value of the assets of Midwest is given as = $ 14.3 million

The fair value of the liabilities of Midwest is given as = $ 2.5 million

∴ The fair value of the total identifiable assets = Midwest's assets - Midwest's liabilities

                                                                           = 14.3 - 2.5

                                                                           = $ 11.8 million

Therefore the goodwill amount = 19 - 11. 8

                                                   = $ 7.2 million

A

Explanation:

In this question, we are asked to determine the production level and cost per gadget required for profit maximization.

p(x) = 250 - 0.01x

c(x) = 1000+25x

The total amount made from selling a number of x gadgets= number of gadgets * cost at which the gadget is sold per piece

Mathematically = r(x) = x p(x) = 250x - 0.01x^2

The profit made is equate to the revenue minus the cost of production

Mathematically

p(x) = r(x) - c(x) = 250x - 0.01x^2 - (1000+25x) = 225x - 0.01x^2 -1000

To get maximum profit, the first derivative of the profit must be equal to 0

p'(x) = 225 - 0.02x

p'(x)=0 gives 225-0.02x=0

=> x = 11250

and p(x) = 250 - 0.01*11250 = 137.50