Question

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?

Answer 1

Answer:

The crossover point is 50 units.

Explanation:

Giving the following information:

Process A:

Fixed costs of $1000

Variable costs of $5 per unit.

Process B:

Fixed costs of $500

Variable costs of $15 per unit.

First, we need to structure the total cost formula:

Process A= 1,000 + 5x

Process B= 500 + 15x

x= number of units

Now, we equal both formulas and isolate x:

1,000 + 5x = 500 + 15x

500 = 10x

50=x

The crossover point is 50 units.