Use the following information for Exercises 3-37 and 3-38: 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 50,000 stents. Actual maintenance costs for the year were as expected. ( Note: Round all answers to two decimal places.) Cost Behavior Refer to the information for Alisha Incorporated above. However, now assume that Alisha produced 25,000 medical stents (rather than 50,000). Required: 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? 5. What is the fixed maintenance cost per unit? 6. What is the variable maintenance cost per unit? 7. CONCEPTUAL CONNECTION The number of stents produced in Exercise 3-38 (25,000) is only half of the number produced in Exercise 3-37 (50,000), yet the maintenance cost per unit (see Requirement 4) is larger in Exercise 3-38 than in Exercise 3-37. Briefly explain why Alisha’s maintenance cost per unit in Exercise 3-38 is different than in Exercise 3-37. Should Alisha’s management use maintenance cost per unit to make decisions?

BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Solutions

Chapter 3, Problem 38E
Textbook Problem

Use the following information for Exercises 3-37 and 3-38:

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 50,000 stents. Actual maintenance costs for the year were as expected. (Note: Round all answers to two decimal places.)

Cost Behavior

Refer to the information for Alisha Incorporated above. However, now assume that Alisha produced 25,000 medical stents (rather than 50,000).

Required:

  1. 1. What is the total maintenance cost incurred by Alisha last year?
  2. 2. What is the total fixed maintenance cost incurred by Alisha last year?
  3. 3. What is the total variable maintenance cost incurred by Alisha last year?
  4. 4. What is the maintenance cost per unit produced?
  5. 5. What is the fixed maintenance cost per unit?
  6. 6. What is the variable maintenance cost per unit?
  7. 7. CONCEPTUAL CONNECTION The number of stents produced in Exercise 3-38 (25,000) is only half of the number produced in Exercise 3-37 (50,000), yet the maintenance cost per unit (see Requirement 4) is larger in Exercise 3-38 than in Exercise 3-37. Briefly explain why Alisha’s maintenance cost per unit in Exercise 3-38 is different than in Exercise 3-37. Should Alisha’s management use maintenance cost per unit to make decisions?

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Chapter 3 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
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