Question

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

To construct a crossover chart showing the comparative total costs of each process, plot the different levels of output and their corresponding average costs. Use the given information to determine the volume of units produced and the average cost of production for each process. Plot the points on a graph to visualize the comparative total costs of each process.

Step-by-step explanation:

To construct a crossover chart showing the comparative total costs of each process, we need to plot the different levels of output and their corresponding average costs. Based on the given information, we have three processes: S, M, and L. Plant S produces 30 units with an average cost of $30 per toaster oven. Plant M produces 50 units with an average cost of $20 per toaster oven. Plant L produces 150 units with an average cost of $10 per toaster oven.

The crossover chart would have volume x of units produced on the horizontal axis and the average cost of production on the vertical axis. We would plot the points (30, 30), (50, 20), and (150, 10) to show the comparative total costs of each process.