Answer the following questions using the information below:
The Salmon Bay Corporation currently uses a manufacturing facility costing $200,000 per year; 80% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 20% of the facility and increase the overall costs of maintaining the space by 5%.
-If the stand-alone method were used, what amount of cost would be allocated to the start-up business?
A)$40,000
B)$50,000
C)$40,000.
D)$42,000

Question

Quizplus · Accepted Answer

To start with, the cost of the facility that would be allocated to the start-up business would be 20% of the total cost of the facility. 
20% of $200,000 = $40,000
However, since the start-up business would increase the overall cost of maintaining the space by 5%, the total cost would be:
$200,000 + 5% of $200,000 = $210,000
So, instead of allocating $40,000, we need to allocate 20% of $210,000 to the start-up business: 
20% of $210,000 = $42,000. 
Thus, the answer is D.

Answer the Following Questions Using the Information Below