Question

1. 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 = $2,225,000 + $150X, where X = Number of Heart Stents. Last year, Alisha produced 63,000 stents. Actual maintenance costs for the year were as expected.

   Required:

   If required, round your answers to the nearest cent.

   1. What is the total maintenance cost incurred by Alisha last year?
   
   $

   2. What is the total fixed maintenance cost incurred by Alisha last year?
   
   $

   3. What is the total variable maintenance cost incurred by Alisha last year?
   
   $

   4. What is the maintenance cost per unit produced?
   
   $per unit

   5. What is the fixed maintenance cost per unit?
   
   $per unit

   6. What is the variable maintenance cost per unit?
   
   $per unit

Answer 1

1. Total maintenance cost incurred by Alisha last year = $2,225,000 + ($150 * 63,000)

= $11,675,000

2. Total fixed maintenance cost incurred by Alisha last year = $2,225,000

3. The total variable maintenance cost incurred by Alisha last year = $150 * 63,000 = $9,450,000

4. The maintenance cost per unit produced = $11,675,000 / 63,000 = $185.32 per unit *

5. The fixed maintenance cost per unit = $2,225,000 / 63,000 = $35.32 per unit *

6. Variable maintenance cost per unit = $9,450,000 / 63,000 = $150 per unit *

* Rounded to 2 decimal places.