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crossover point is that production quantity where: variable costs of one process equal the variable costs of another process fixed costs of a process are equal to its variable costs costs equal total revenues for a process costs for one process equal total costs for another process the process no longer loses money
Answer
Answer: (d) Total
costs for one process equal total costs for another process.
Explanation:
Crossover point between two processes is determined using the
breakeven analysis. Suppose there are two processes A and B with a
given fixed cost and variable costs.
Total cost = Fixed cost + (Variable
cost x Number of units)
At the crossover
point,
Total cost of process A =
Total cost of process B
Let the breakeven quantity be given
by Q. Therefore,
F(A) + [V(A) x Q] = F(B) + [V(B) x
Q]
where,
F(A) = Fixed cost of process A
V(A) = Variable cost of process
A
F(B) = Fixed cost of process B
V(B) = Variable cost of process B
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