Process X has fixed costs of $10,000 and variable costs of $2.40 per unit. Process Y has fixed costs of $9,000 and variable costs of $2.25 per unit. Which of the following statements is TRUE?
A) The crossover point is approximately 6667 units.
B) It is impossible for one process to have both of its costs lower than those of another process.
C) Process Y is cheaper than process X at all volumes.
D) Process X should be selected for very large production volumes.
E) Process X is more profitable than process Y and should be selected.

Question

Quizplus · Accepted Answer

Process Y has both lower fixed costs ($9,000 vs. $10,000) and lower variable costs ($2.25 vs. $2.40 per unit) compared to Process X, making it cheaper at all production volumes.

Process X Has Fixed Costs of $10,000 and Variable Costs