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Take a Test-Oshayne Whitingham- Google Chrome Secure l https//www.mathudcom/Student/PlayerTest.aspx?testida 174 1 xtestlda 17419615 Principles of Business Finance Submi Test:Exam 3 This Test: 60 pts pos This Question: 1 pt 43 of 60 The owner ofaconvenience store is considering ading a take out sandwich secton to her offering. The new activity account for 30% of total revenues. Property insurance gn the buldngisg9 00 per year and wil not change insurance premium should be allocated to the new product ine? wil occupy 25% of the space and because of the new activity How much of the OA. $2.475 OB. $2250 O C. $0 00 O D. $2,700

Explanation / Answer

Option: A is correct > $ 2,475

The space occupancy = 25% and Revenue share = 30%

Cost allocation of insurance premium should be based average of benefit and cost.

Cost is represented by space occupancy here it implies because, space has its total rental cost which 100% then new business has to pay 25% as it occupies that much portion.

Revenue share is already give as 30%

Now, take average of cost and benefit = (25% + 30%)/2 = 55%/2 = 27.5%

Hence, 27.5% of $ 9,000 of insurance cost is equal to: $ 2,475

Hence correct option is A

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