Question

Process A has fixed costs of $2000 and variable costs of $8 per unit. Process B has fixed costs of $600 and variable costs of $12 per unit. Process C has fixed costs of $1,200 and variable costs of $10 per unit.

(20 pts.) Create a crossover chart in Excel.

(20 pts.) Determine the crossover points.

(20 pts.) Determine the economical volume for each process.

Answer 1

BEP = Fixed cost / contribution margin
Crossover point = FC1-FC2 / CM2-CM21
Process	1	2	3
Fixed cost	2000	1200	600
Variable cost	8	10	12
Contribution margin	8	10	12
BEP	250	120	500
Crossover point		400	300

2. cross over point from  B to C is 300 units while from C to A, it is 400 units.

3. It can be seen that from 1 to 300, process B is more economical. Form 301 to 400, process C is more economical while for units 401 or more, process A is more economical.