Question

Consider the three processes described below, which are being evaluated as possible choices to handle production of units for the firm ACU Associates.

PROCESS FIXED COSTS ($) VARIABLE COST PER UNIT ($)
A 1100 8
C 1450 6.5
U 990 9

Construct a crossover chart to show the comparative total costs of each process, as a function of the volume x of units produced. Your graph should be neat, complete, reasonably scaled, and clearly labeled with all relevant information.

Answer 1

A crossover chart is created by plotting the total cost equations of processes A, C, and U on a graph, with the number of units on the horizontal axis and the total cost on the vertical axis. the crossover points where the lines intersect indicate the volumes at which two processes have the same total cost. the chart should be clearly labeled and scaled.

Step-by-step explanation:

To construct a crossover chart showing the comparative total costs of each production process for ACU Associates, we'll graph the total cost equations for processes A, C, and U. the total cost equation for each process combines both fixed and variable costs. It's calculated by multiplying the variable cost per unit by the quantity of units produced (x), then adding the fixed cost.

For process A, the total cost equation is TC = 8x + 1100. For process C, it's TC = 6.5x + 1450. And for process U, it's TC = 9x + 990. On the graph, we plot the quantity of units on the horizontal axis and the total cost on the vertical axis. The point where two lines intersect is called the crossover point, and it indicates the quantity at which two processes have the same total cost. a well-constructed crossover chart should include a clear title, labeled axes, a legend indicating which line corresponds to each process, and should be drawn to scale to accurately represent the relationships between the processes at various production volumes.