The Mask Makers is a local mask making company. Due to the recent COVID pandemic, business has been

busy. The owner sells two sizes of masks, the "Adult" and the "Kids". There are special air filter put in each

mask. The filters in the "Adult" masks cost $0.10 each. The "Kids" filters cost $0.25 each. The company uses

the number of filters as its driver in applying overhead. To total estimated manufacturing overhead is

$41,000. The owner has supplied you with the following information.

The Mask Makers

Adult Kids

Direct Materials (the filters) ? ?

Direct Labour $ 3.00 $ 2.50

# of filters in a mask 30 10

# of masks produced 6,000 2,500

The owner wants to explore an activity-based costing system. Currently she sells the "Adult" masks for $15 /

mask and the "Kids" masks for $10/ mask. She has supplied you with the following information for ABC.

Activity (Cost Driver) Estimated MOH Expected Activity

Total Adult Kids

Assembly (Labour Hours) $ 20,000 22,000 15,000 7,000

Quality Control (Inspection Hours) $ 13,000 5,000 3,000 2,000

Packaging (packaging hours) $ 8,000 500 150 350

TOTAL $ 41,000

Required:

1. Under the traditional costing method:

a. Compute the predetermined overhead rate

b. Determine the total per mask cost for each product

2. Under the activity based costing:

a. Compute the activity rates for each activity

b. Determine the total per mask cost for each product

3. Compare and comment on the answers from #1 and 2 keeping in mind:

a. The different method and the different costs (if there is a difference)

b. Looking at the two costing methods and the selling price, what would you suggest to the

owner about her selling price?