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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

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 Mahoney​, 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. Mahoney divides Orange​'s costs into four​ activity-cost categories.

Calculate the cost of each activity and the total cost of the heat testing and stress testing.

 

Heat Test (HT)

 

Total

 

Cost

Direct labor

 

Equipment

 

Setup

 

Design

 

Total

Feb 10 2020 View more View Less

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