X Requirements 1. Classify each activity cost as output unit-level, batch-level, product- or service-sustaining, or facility-sustaining. Explain each answer. 2. Calculate the cost per test-hour for HT and ST. Explain briefly the reasons why these numbers differ from the $13 per test-hour that Ayer calculated using its simple costing system. 3. Explain the accuracy of the product costs calculated using the simple costing system and the ABC system. How might Ayer's management use the cost hierarchy and ABC information to better manage its business? Print DoneData table Direct-labor costs, $243,000. These costs can be directly traced to HT, $183,000. and ST, $60,000. Equipment-related costs (rent. maintenance, energy. and so on), $400,000. These costs are allocated to HT and ST on the basis of testhours. Setup costs, $385,000. These costs are allocated to HT and ST on the basis of the number of setup-hours required. HT requires 13.500 setup-hours. and ST requires 4,000 setup-hours. Costs oi designing tests, $251000. These costs are allocated to HT and ST on the basis of the time required for designing the tests. HT requires 2,800 hours, and ST requires 1,400 hours. Ayer Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Ayer aggregates all operating costs of $1,300,000 into a single overhead cost pool. Ayer calculates a rate per test-hour of $13 ($1,300,000 + 100,000 total test-hours) HT uses 60,000 test-hours, and ST uses 40,000 test-hours. Gary Daley, Ayer's controller, believes that there is enough variation in test procedures and cost structures to establish separate costing and biling 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 Ayer to lose business. Daley divides Ayer's costs into four activity-cost categories. #:(Click the icon to view the activity-cost categories.) Read the requirements. Cost Item Cost-type a. Direct labor Output unit-level b. Equipment-related costs (rent, maintenance, energy, etc.) Output unit-level C. Setup costs Batch-level d. Costs of designing tests Service-sustaining 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 HIT and ST. Explain briefly the reasons why these numbers differ from the $13 per test-hour that Ayer calculated using its simple costing system. First, determine the formula used to calculate the cost for each activity in each test type. Activity hours per test type x Activity rate = Cost per activity Calculate the cost of each activity and the total cost of the heat testing and stress testing Heat Test (HT) Total Cost Direct labor Equipment Setup Design Total