Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B has fixed costs of $500 and variable costs of $15 per unit. The crossover point between process A and process B is
A) 50 units
B) 200 units
C) $2,500
D) $5,000
E) $9,500

Question

Quizplus · Accepted Answer

The crossover point is the point at which the total costs of the two processes are equal. To find the crossover point, we can set the total cost equations for the two processes equal to each other and solve for the quantity produced.Total cost for Process A = Fixed costs + Variable costs= $1000 + $5 per unitTotal cost for Process B = Fixed costs + Variable costs= $500 + $15 per unitSetting the two equations equal to each other, we get:$1000 + $5 per unit = $500 + $15 per unit$500 = $10 per unitUnit = 50 unitsTherefore, the crossover point between process A and process B is 50 units.

Process a Has Fixed Costs of $1000 and Variable Costs