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.What is the crossover point between process A and process B?
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 both processes are equal. To find the crossover point, we can set the total cost equations for both processes equal to each other and solve for the quantity produced.Total cost for process A = Fixed costs + Variable costs * QuantityTotal cost for process B = Fixed costs + Variable costs * QuantitySetting the two equations equal to each other, we get:1000 + 5 * Quantity = 500 + 15 * QuantitySolving for Quantity, we get:Quantity = 50 unitsTherefore, the crossover point between process A and process B is 50 units.

Process a Has Fixed Costs of $1000 and Variable Costs