Answer the Following Questions Using the Information Below

question 101

Multiple Choice

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 incremental method were used, what amount of cost would be allocated to the start-up business?

• A)$10,000
• B)$50,000
• C)$40,000
• D)$42,000

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Definitions:

Labor Rate Variance

The difference between the actual cost of direct labor and the standard cost, indicating how well the company is managing its labor costs.

Direct Labor Standards

The expected amount of time and wage rate for workers to complete a unit of production.

Labor Efficiency Variance

A measure of the difference between the actual hours worked and the standard hours expected to produce a certain level of output.

Standard Cost System

An accounting method that uses cost estimates for labor, materials, and overhead to assign costs to products, facilitating variance analysis between expected and actual costs.