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 $ 400,000 Overhead Cost Pool Direct labor related Material ordering Material inspection Equipment setup Quality control Machine related Miscellaneous Annual/Cost Driver 1,000,000 Direct labor cost ($) 5,000 purchase orders 4,000 receiving reports 1,000 setups 2,000 inspections of motors 40,000 machine hours 4,000,000 Product costs (S) other than miscellaneous overhead Total overhead $2900,000 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. Material cost Labor cost Purchase orders Receiving reports Setups Inspections Machine hours $500 $200 10 Note that the costs indicated are for all 10 motors - not per motor. Required: 1. What is the traditional companywide overhead application rate? 2. 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 used a traditional costing system? 3. 4. Calculate the cost of the Kromer Department Store job using the new ABC system. 5. Briefly explain why overhead costs are higher or lower using the ABC system compared to the traditional companywide system above