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 advertising expense is $240,000 and it is allocated on the basis of sales, the amount allocated to the New Department should be
A) $40,000.
B) $60,000.
C) $168,000.
D) $200,000.

Question

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 advertising expense is $240,000 and it is allocated on the basis of sales, the amount allocated to the New Department should be
A) $40,000. 
B) $60,000. 
C) $168,000. 
D) $200,000.

Quizplus · Accepted Answer

The New Department's sales are $40,000, which is 20% of the total sales of $200,000. Therefore, the New Department should be allocated 20% of the total advertising expense, which is $40,000.

Stohr Company Has Two Departments, New and Old