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Orange Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates...

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Accounting

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Orange Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Orange aggregates all operating costs of $1,360,000 into a single overhead cost pool. Orange 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 Sarsfield, Orange'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 Orange to lose business. Sarsfield divides Orange's costs into four activity-cost categories alculesar and

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