The owner of a convenience store is considering adding a take-out sandwich section to her offerings. The new activity will occupy 25% of the space and account for 30% of total revenues. Property insurance on the building is $9,000 per year and will not change because of the new activity. How much of the insurance premium should be allocated to the new product line?
A) $2,700
B) $2,475
C) $2,250
D) $0.00

Question

Quizplus · Accepted Answer

The insurance premium is a fixed cost that does not change with the addition of the new product line. Therefore, no portion of the insurance premium should be allocated based on the new activity.

The Owner of a Convenience Store Is Considering Adding a Take-Out