Best Test Laboratories was founded 25 years ago to evaluate the reaction of materials to extreme increases in temperature. Much of the company's early growth was attributable to government contracts to test the suitability of weapons, transportation equipment, and clothing for use in arid desert regions. Recent growth has come from diversification and expansion into commercial markets. Environmental testing at Best Test now includes: heat testing (HTT) e air turbulence testing stress testing (SST) arctic condition testing (ACT aquatic testing (AQT) Currently, all the company's budgeted operating costs are collected in a common overhead pool. All of the estimated testing hours are collected in another common pool. One rate per test hour is used to estimate the cost of all five types of testing. In determining the sales price, this hourly rate is marked up by 45% to cover administrative expenses, taxes, and profit. Rick Shaw, Best Test's operations engineer, believes that there is enough variation in the test procedures and cost structure to establish separate costing and billing rates. After analyzing the following data, he has recommended that new rates be put into effect at the beginning of Best Test's fiscal year The budgeted total costs for the coming year are as follows Test pool labor (10 employees) Supervision Equipment depreciation Heat Electricity Water Setup Indirect materials Operating supplies $420,000 72,000 178,000 170,000 124,000 74,000 58,000 104,000 60,000 Total costs Total estimated test hours 105,000