Stohr Company Has Two Departments, New and Old

question 104

Multiple Choice

Stohr Company has two departments, New and Old. Central costs are allocated to the two departments in various ways. Relevant information is presented below:

-If total payroll processing costs are $64,000 and they are allocated on the basis of number of employees, the amount allocated to the New Department should be

• A) $44,800.
• B) $16,000.
• C) $10,667.
• D) $19,200.

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Definitions:

Indirect Method

A technique used in preparing the cash flow statement, where net income is adjusted for changes in balance sheet accounts to calculate operating cash flow.

Depreciation

The systematic reduction in the recorded cost of a fixed asset to allocate its cost over its useful life, reflecting wear and tear, deterioration, or obsolescence.

Current Asset

An asset that is expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of a business.

Cash Dividends

Payments made by a corporation to its shareholder members from the company's current or retained earnings.