Holliston Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Holliston aggregates all operating costs of $1, 190,000 into a single overhead cost pool. Holliston calculates a rate per test-hour of $17 ($1, 190,000/70,000 total test-hours). HT uses 40,000 test-hours, and ST uses 30,000 test-hours. Gary Daley, Holliston's controller believes that there is enough variation in test procedures and cost structures to establish separate costing and billing rates for HT and ST. The market for test services is becoming competitive. Without this information, any miscosting and mispricing of its services could cause Holliston to lose business. Daley divides Holliston's costs into four activity-cost categories. Requirement 1. Classify each activity cost as output unit-level, batch-level, product- or service-sustaining. or facility-sustaining. Explain each answer. Output unit-level costs are related to the number of units tested: required for each unit tested. Batch-level costs are related to a group of units of the service. They are not related to the number of units tested. Service-sustaining costs are costs used to support individual services regardless of the number of units or batches tested. Facility-sustaining costs are costs that can not be traced to individual services but support the company as a whole. Requirement 2. Calculate the cost per test-hour for HT and ST. Explain briefly the reasons why these numbers differ from the $17 per test-hour that Holliston calculated using its simple costing system. First, determine the formula used to calculate the cost for each activity in each test type