Answer:
The cross-over point is about 22 computers.
Explanation:
Fixed cost, F = 0
Variable cost = $50
Option B
Fixed cost, F = $1,000
Variable cost, V = $5
Therefore,
Total cost = F + (n × V)
n = no of units
Option A
Total cost TC = 50n
Option B
Total cost TC = 1000 + 5n
We can calculate cross-over point by equalizing two options
:
50n = 1000 + 5n
45n = 1000
n = 22.2
The cross-over point is about 22 computers.
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