Bender Electric Motors produces electric motors used by home appliance and other manufacturing companies. Traditionally overhead has been allocated based on total direct labor costs. The coming year overhead is estimated to be $2,900,000 with 1,000,000 direct labor dollars. Bender has recently adopted an activity-based costing system with the following overhead costs and cost drivers: Overhead Amount S 400,000 100,000 600,000 200,000 400,000 800,000 S 400,000 Overhead Cost Pool Direct labor related Material ordering Material inspection Equipment setup Quality control Machine related Miscellaneous Annual/Cost Driver Direct labor cost (S) 1,000,000 5,000 purchase orders 4,000 receiving reports 1,000 setups 2,000 inspections of motors 40,000 machine hours Product costs (S) other than miscellaneous overhead 4,000,000 $2,900,000 Total overhead Recently, the company received an order from Kromer's Department Stores for 10 identical motors for use in a holiday display. Bender estimates the following costs and activities related to the order. $500 $200 2 Material cost Labor cost Purchase orders Receiving reports Setups Inspections Machine hours 10 o al10 motors- not per motor Note that the costs indcae Required: What is the traditional companywide overhead application rate? What amount of overhead is applied to Kromer Department Store job above under the traditional companywide overhead method? Calculate the cost of the Kromer Department Store job assuming the company useda traditional costing system? 1. 2. 3. 4. Calculate the cost of the Kromer Department Store job using the new ABC system. Briefly explain why overhead costs are higher or lower using the ABC system comparec to the traditional companywide system above. 5