Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system,

Springfield

aggregates all operating costs of

$1,360,000

into a single overhead cost pool.

Springfield

calculates a rate per test-hour of

$16

($1,360,000

85,000

total test-hours). HT uses

55,000

test-hours, and ST uses

30,000

test-hours. Gary

Lawler,

Springfield'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

Springfield

to lose business.

Lawler

divides

Springfield's

costs into four activity-cost categories.