Hull Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Hull aggregates all operating costs of $1,200,000 into a single overhead cost pool. Hull calculates a rate per test-hour of $16 ($1,200,000 + 75,000 total test-hours). HT uses 50.000 test-hours, and ST uses 25,000 test-hours. Gary Maloney, Hull'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 Hull to lose business. Maloney divides Hull's costs into four activity-cost categories. a (Click the icon to view the activity-cost categories) Data table Read the muirements. Direct-labor costs, $225,000. These costs can be directly traced to HT, $175,000, and ST, $50,000. . Equipment-related costs (rent, maintenance, energy, and so on), $375,000. These Batch-level costs are related to a group of units of the service. They are not related to the number of units tested. costs are allocated '0 HT and ST on the basis of test-hours. Output unit-level costs are related to the number of units tested; required for each unit tested. Service-sustaining costs are costs used to support individual services regardless of the number of units or batches tested. . Setup costs, $360,000. These costs are allocated to HT and ST on the basis of the number of setup-hours required. HT requires 10,000 setuphours, and ST requires Facility-sustaining costs are costs that can not be traced to lndwldual sewices but support the company as a whole. 5,000 setup-hours. Requirement 2. Calculate the cost per test-hour for HT and ST. Explain briey the reasons why these numbers differ from the $16 p- - 90515 0f designing 19515. $240000 These 00818 are allocated '0 HT and ST 0" the basis of the time required for designing the tests. HT requires 2.500 hours, and ST First, determine the formula used to calculate the cost for each activity in each test type. requires 1,500 hours. Activity rate x Activity hours per test type = Cost per activity x Calculate the cost of each activity and the total cost of the heat testing and stress testing. Reqwrements Heat Test (HT) T tat 1. Classify each activity cost as output unit-level, batch-level, product- or o service-sustaining, or facility-sustaining. Explain each answer. 0051 2. Calculate the cost per test-hour for HT and ST. Explain briey the reasons why these numbers differ from the $16 per test-hour that Hull calculated using its simple costing system. Equipment 3. Explain the accuracy of the product costs calculated using the simple costing system and the ABC system. How might Hull's management use the cost hierarchy and ABC information to better manage its business? Direct labor Setup Design Total