If the stand-alone method were used, what amount of cost would be allocated to the start-up business

ACCOUNTING

Multiple Choice

The Sturgeon Bay Corporation currently utilizes a manufacturing facility costing $400,000 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. $20,000

b. $100,000

c. $80,000

d. $84,000

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