A company purchases a 8,970-square-foot building for $415,000. The building has two separate rental units. Unit A, which has the desirable location on the corner and contains 1,170 square feet, will be rented for $2.00 per square foot. Unit B contains 7,800 square feet and will be rented for $1.20 per square foot.How much of the joint cost should be allocated to Unit A and to Unit B using the value basis of allocatio
Question
A company purchases a 8,970-square-foot building for 2.00 per square foot. Unit B contains 7,800 square feet and will be rented for $1.20 per square foot.How much of the joint cost should be allocated to Unit A and to Unit B using the value basis of allocatio
Solution
To allocate the joint cost based on the value basis of allocation, we first need to determine the total value of each unit.
-
Calculate the total value of each unit by multiplying the square footage by the rental rate:
- Unit A: 1,170 square feet * 2,340
- Unit B: 7,800 square feet * 9,360
-
Calculate the total value of both units combined:
- Total value = Value of Unit A + Value of Unit B = 9,360 = $11,700
-
Calculate the proportion of the total value that each unit represents:
- Unit A: 11,700 = 0.2 or 20%
- Unit B: 11,700 = 0.8 or 80%
-
Allocate the purchase cost of the building to each unit based on these proportions:
- Unit A: 20% * 83,000
- Unit B: 80% * 332,000
So, 332,000 should be allocated to Unit B.
Similar Questions
The manager of a 139139-unit apartment complex finds that all units are rented at a price of $2025$2025 per month. Research shows that for each $45$45 increase in rent, one additional unit remains vacant. How much should he charge for rent in order to bring in maximum revenue and how many units are rented then?
A company rents storage sheds shaped like rectangular prisms. Each shed is 9 feet long, 7 feet wide, and 11 feet tall. The rental cost is $3 per cubic foot. How much does it cost to rent one shed?$
All units in a 100-unit apartment building are rented out when the monthly rent is set at r=$580/month. Suppose that one unit becomes vacant with each $10 increase in rent and that each occupied unit costs $80/month in maintenance. Which rent r maximizes monthly profit?
Answer the following questions using the information below:The Cold Spring Harbor Corporation currently leases a corporate suite in an office building for a cost of$180,000 a year. Only 70% of the corporate suite is currently being used. A start-up business hasproposed a plan that would use the other 30% of the suite and increase the overall costs of maintainingthe space by $20,000.6) If the stand-alone method were used, what amount of cost would be allocated to the start-up business?A) $20,000B) $54,000C) $60,000D) $74,000
Matt is writing an estimate for a client who would like to have a patio built from interlocking blocks. The landscaper has provided two designs that would fit in the yard:Plan 1 is for a patio 3 yards long and 4 yards wide.Plan 2 is for a patio 5 yards long and 2.5 yards wide.The client wants to know how much each plan will cost. Matt will use rectangular bricks that measure 8" by 4" and cost $5.00 a square foot. Matt's labor charge is $8.50 per square foot.1) What is the total cost of plan 2?(Enter your dollars and cents with no dollar symbol.)2) Which plan is the least expensive? Enter plan 1 or plan 2
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.