Question

Cost Behavior Alisha Incorporated manufactures medical stents for use in heart bypass surgery. Based on past experience, Alisha has found that its total maintenance costs can be represented by the following formula: Maintenance Cost = $1,750,000 + $125X, where X = Number of Heart Stents. Last year, Alisha produced 25,000 stents. Actual maintenance costs for the year were as expected. Required: 1. What is the total maintenance cost incurred by Alisha last year? Round your answer to nearest dollar. $ 2. What is the total fixed maintenance cost incurred by Alisha last year? Round your answer to nearest dollar. $ 3. What is the total variable maintenance cost incurred by Alisha last year? Round your answer to nearest dollar. $ 4. What is the maintenance cost per unit produced? Round your answer two decimal places. $ per unit 5. What is the fixed maintenance cost per unit? Round your answer two decimal places. $ per unit 6. What is the variable maintenance cost per unit? Round your answer two decimal places. $ per unit

Answer 1

Answer:

Alisha Incorporated

1. Total maintenance cost incurred by Alisha last year? Round your answer to nearest dollar:

= $4,875,000

2. Total fixed maintenance cost incurred by Alisha last year? Round your answer to nearest dollar:

= $1,750,000

3. Total variable maintenance cost incurred by Alisha last year? Round your answer to nearest dollar:

= $3,125,000

4. Maintenance cost per unit produced? Round your answer two decimal places. $ per unit

= $195

5. Fixed maintenance cost per unit? Round your answer two decimal places. $ per unit

= $70

6. Variable maintenance cost per unit? Round your answer two decimal places. $ per unit

= $125

Explanation:

a) Data and Calculations:

Total maintenance costs = $1,750,000 + $125X,

where X = Number of Heart Stents

Production = 25,000 stents last year.

Total maintenance costs = $1,750,000 + $125 * 25,000

= $1,750,000 + $3,125,000

= $4,875,000

Total maintenance cost per unit = $4,875,000/25,000 = $195

Fixed costs per unit = $70