Test Laboratories evaluates the reaction of materials to extreme increases its temperature. Two types of testing are Heat Testing (HTT) and Arctic condition testing [ACT]. Currently, all of the budgeting operating costs are collected in a single overhead pool. All of the estimated testing hours are also collected in single pool. One rate per test hour is used for both types of testing. This hourly rate is marked up by 45% to recover administrative costs and taxes, and to earn a profit. Rick, controllers, believes that there is enough variation in the test procedures and cost structure to establish separate costing rate and billing rates at 45% mark up. He also believes that the inexible rate structure currently being used in inadequate in today's competitive environment. After analyzing the company data, he has divided operating costs into three cost pools: Rick budgets 106,000 total test hours and for the coming period. This is also cost drivers for labor and supervision. The budgeted quantity of cost driver for set up and facility costs is 800 setup hours. The budgeted quantity for cost driver for utilities is 10,000 machines hours. Rick has estimated HTT uses 60% of the testing hours, 25% for setup hours, and half the machine hours. Required: a. Find the single rate for operating costs based on test hours and the hourly billing rate for H'l'l' and ACT. b. Find the three activity based rates for operating costs c. What will be the billing rate for H'I'l' and ACT be based on the activity based costing structure? State the rate in terms of testing hours. Referring to both requirements 1 and 2, which rate make more sense in Test Laboratories