5-19 ABC, cost hierarchy, service. (CMA, adapted) CoreTech Laboratories does heat testing (HT) and stress testing in on materials and operates at capacity. Under its current simple costing system, CoreTech aggregates all operating costs of $1,800,000 into a single overhead cost pool CoreTech calculates a rate per test-hour of $20 ($1.500.000 90.000 total testhours). HT uses 50,000 test-hours, and ST uses 40.000 test hours. Gary Celeste, Core Tech'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 CoreTech to lose business Celeste divides CoreTech's costs into four activity-cost categories Direct-labor costs, 5276,000. These costs can be directly traced to HT, 8204,000, and ST, $72,000. 1. Equipment-related costs trent, maintenance, energy, and so on), 5495,000. These costs are allocated to HT and ST on the basis of test-hours c. Setup costs, $630,000. These costs are allocated to HT and ST on the basis of the number of setup hours required. HT requires 15,000 setup.hours, and ST requires 6,000 setup-hours. d. Costs of designing tests, $399,000. These costs are allocated to HT and ST on the basis of the time te quired for designing the tests. HT requires 4,000 hours, and ST requires 2,000 hours. 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 diffet from the S20 per test-hour that CoreTech calculated using its simple costing system. 2 Explain the accuracy of the product costs calculated using the simple costing system and the ABC system. How might Core Tech's management use the cost hierarchy and ABC information to better manage its business