Maynard Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Maynard aggregates all operating costs of $1,200,000 into a single overhead cost pool. Maynard 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 Lawler, Maynard'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 Maynard to lose business. Lawler divides Maynard's costs into four activity-cost categories. (Click the icon to view the activity-cost categories.) Read the requirements. Requirements te-su Data table a. 1. Classify each activity cost as output unit-level, batch-level, product-or service-sustaining, or facility-sustaining. Explain each answer. b. 2. Calculate the cost per test-hour for HT and ST. Explain briefly the reasons why these numbers differ from the $16 per test-hour that Maynard calculated using its simple costing system. C. 3. Explain the accuracy of the product costs calculated using the simple costing system and the ABC system. How might Maynard's management use the cost hierarchy and ABC information to better manage its business? d. Print Done hy tr Direct-labor costs, $105,000. These costs can be directly traced to HT, $75,000, and ST, $30,000. Equipment-related costs (rent, maintenance, energy, and so on), $450,000. These costs are allocated to HT and ST on the basis of test-hours. Setup costs, $425,000. These costs are allocated to HT and ST on the basis of the number of setup-hours required. HT requires 12,000 setup-hours, and ST requires 5,000 setup-hours. Costs of designing tests, $270,000. These costs are allocated to HT and ST on the basis of the time required for designing the tests. HT requires 2,500 hours, and ST requires 2,000 hours. Print Done - X Requirement 1. Classify each activity cost as output unit-level, batch-level, product- or service-sustaining, or facility-sustaining. Explain each answer. a. Direct labor Cost Item b. Equipment-related costs (rent, maintenance, energy, etc.) c. Setup costs Cost-type Output unit-level Facility-sustaining Batch-level Service-sustaining d. Costs of designing tests Output unit-level costs are Batch-level costs are Service-sustaining costs are Facility-sustaining costs are r Requirement 1. Classify each activity cost as output unit-level, batch-level, product- or service-sustaining, or facility-sustaining. Explain each answer. Cost Item a. Direct labor b. Equipment-related costs (rent, maintenance, energy, etc.) c. Setup costs d. Costs of designing tests Output unit-level costs are Batch-level costs are Service-sustaining costs ar Facility-sustaining costs are Requirement 2. Calculate First, determine the formula Cost-type Output unit-level Facility-sustaining Batch-level Service-sustaining costs that can not be traced to individual services but support the company as a whole. costs used to support individual services regardless of the number of units or batches tested. related to a group of units of the service. They are not related to the number of units tested. related to the number of units tested; required for each unit tested. er test-hour that Maynard Requirement 2. Calculate the cost per test-hour for HT and ST. Explain briefly the reasons why these numbers differ from the $16 per test-hour that Maynard calculated using its simple costing system. First, determine the formula used to calculate the cost for each activity in each test type. Cost per activity Calculate the cost of each activity and the total cost of the heat testing and stress testing. Heat Test (HT) Stress Test (ST) Total Total Cost Cost Direct labor 100000 46000 Equipment 200000 150000 Setup 340000 90000 180000 84000 Design Total 820000 370000 Determine the formula to calculate the HT cost per test-hour and enter the amounts to calculate the rate. (Round the rate to the nearest cent.) HT Cost per test-hour per test-hour Determine the formula to calculate the HT cost per test-hour and enter the amounts to calculate the rate. (Round the rate to the nearest cent.) HT Cost per test-hour per test-hour Determine the formula to calculate the ST cost per test-hour and enter the amounts to calculate the rate. (Round the rate to the nearest cent.) ST Cost per test-hour per test-hour The cost per test-hour for HT and ST differs from the cost per test-hour using the simple rate because: Requirement 3. Explain the accuracy of the product costs calculated using the simple costing system and the ABC system. How might Maynard's management use the cost hierarchy and ABC information to better manage its business? The accuracy of the product costs will be products. Management can use the ABC costs to with the ABC system instead of the simple costing system. The ABC product costs will the utilization of resources by both The cost hierarchy enables management to more accurately determine the cost drivers of costs.