Stoltz Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Data Processing and Personnel, and two operating departments, Assembly and Finishing. Data Processing Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees. The total amount of Data Processing Department cost allocated to the two operating departments is closest to:

A) $23,245
B) $26,488
C) $61,567
D) $16,874

Question

Stoltz Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Data Processing and Personnel, and two operating departments, Assembly and Finishing.

Data Processing Department costs are allocated on the basis of computer workstations and Personnel Department costs are allocated on the basis of employees. The total amount of Data Processing Department cost allocated to the two operating departments is closest to:

A) $23,245
B) $26,488
C) $61,567
D) $16,874

Andrew Styron · Accepted Answer

Final Answer : B, Explanation :  Without knowing the exact numbers of computer workstations and employees in each department and the specific allocation rates, we cannot calculate the exact amount of Data Processing Department cost allocated. However, we can eliminate choices A, C, and D as they are significantly higher or lower than the other options. Therefore, the best choice is B, $26,488, as it is the closest to the midpoint between the other options and may be a reasonable estimate based on the given information.

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