Process a Has Fixed Costs of $1000 and Variable Costs

question 83

Multiple Choice

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. The crossover point between process A and process B is

• A) 50 units
• B) 200 units
• C) $2,500
• D) $5,000
• E) $9,500

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Definitions:

Initial Investment

The initial amount of money spent to start a business venture or project, including costs for assets, resources, and initial operating expenses.

Internal Rate of Return

A metric used in financial analysis to estimate the profitability of potential investments, representing the discount rate that makes the net present value of all cash flows from a particular project equal to zero.

Estimated Savings

Projected reductions in costs resulting from efficiency measures, budget adjustments, or the implementation of strategic plans.

Incremental Cost

The additional cost that arises from producing one more unit of a good or service.