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Positive Laboratories evaluates the reaction of materials to extreme increases in temperature. Much of the company's early growth was attributable to government contracts, but recent growth has come from expansion into commercial markets.

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John Brock, Positive's controller, believes that there is enough variation in the test procedures and cost structure to establish separate costing rates and billing rates at a $35\%$ markup. He also believes that the inflexible rate structure the company is currently using is inadequate in today's competitive environment.

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John Brock budgets $107,000$ total test$-$hours for the coming period. Test$-$hours is also the cost driver for labor and supervision. The budgeted quantity of cost driver for setup and facility costs is $900$ setup hours. The budgeted quantity of cost driver for utilities is $12,000$ machine$-$hours. John has estimated that HTT uses $70\%$ of the test$-$hours, $30\%$ of the setup$-$hours, and half the machine$-$hours.

Requirements

Find the single rate for operating costs based on test$-$hours and the hourly billing rate for HTT and ACT.

Find the three activity$-$based rates for operating costs.

What will the billing rate for HTT and ACT be based on the activity$-$based costing structure? State the rates in terms of test$-$hours. Referring to both requirements $1$ and $2,$ which rates makes more sense for Positive?

If Positive's competition all charge $$17$ per hour for arctic testing, what can Positive do to stay competitive?

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