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 using ABC. 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? 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 $975,000 into a single overhead cost pool. Ayer calculates a rate per test-hour of $13 ($975,000 75,000 total test-hours). HT uses 55,000 test-hours, and ST uses 20,000 test-hours. Gary Lawler, Ayer'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 Ayer to lose business. Lawler divides Ayer's costs into four activity-cost categories