Response to the following problem:
Abrams Company manufactures miniature speakers that are built into the headrests of high-end lounge chairs. Based on past experience, Abrams has found that its total annual overhead costs can be represented by the following formula: Overhead cost = $350,000 + $2.20X, where X = number of speakers. Last year, Abrams produced 70,000 speakers. Actual overhead costs for the year were as expected.
Required:
1. What is the driver for the overhead activity?
2. What is the total overhead cost incurred by Abrams last year?
3. What is the total fixed overhead cost incurred by Abrams last year?
4. What is the total variable overhead cost incurred by Abrams last year?
5. What is the overhead cost per unit produced?
6. What is the fixed overhead cost per unit?
7. What is the variable overhead cost per unit?
8. Recalculate Requirements 5, 6, and 7 for the following levels of production:
(a) 50,000 units and
(b) 100,000 units. Explain this outcome.