Cost Allocation (Direct Method):

Allocate the following service department costs to the production departments using the direct method:

• Service Department A: $30,000
• Service Department B: $20,000
• Production Department X: 50% of the total hours
• Production Department Y: 50% of the total hours

Requirements:

1. Allocate the service department costs to Production Department X.
2. Allocate the service department costs to Production Department Y.
3. Discuss the advantages and disadvantages of using the direct method for cost allocation.