8.16 Q1, Q3, Q7 Direct method using estimated costs, benchmarking Devon allocates support department costs using the direct method and estimated costs. The support department costs are budgeted at $88,000 for department A. $63,000 for department B, and $40,000 for department C. These costs are allo- cated using the proportion of total cost the firm would pay to an outside service provider. Direct costs Labor hours Support Dept. A $88,000 Operating Dept. B Dept. C Casting Machine $63,000 $40,000 6,000 4,000 Machine hours Costs if support services were purchased outside: Department A Department B Department C 2,000 10,000 $50,000 $60,000 $40,000 $30,000 $20,000 $30,000 REQUIRED: A. Allocate budgeted support department costs using the direct method, first using labor hours and then with the outside cost proportions as the allocation bases. B. Could Devon Inc. use the cost of purchasing outside as an efficiency benchmark for the cost of both the support departments and the user departments? List several advantages and disadvantages of this approach.