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Process Xhas a fixed cost of Rs. 50,000 per month and a variable cost of Rs. 10 per unit. Process Y has a fixed cost of Rs. 20,000 per month and a variable cost of Rs. 25 unit. At which value, total costs of processes X and Y will be equal
  • a)
    1200
  • b)
    1400
  • c)
    1800
  • d)
    2000
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
Process Xhas a fixed cost of Rs. 50,000 per month and a variable cost ...
TCX ⇒ TCY
⇒ 50,000 + 10 N = 20,000 + 25 N
∴ 15 N = 30,000
∴ N = 2,000 unit
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Most Upvoted Answer
Process Xhas a fixed cost of Rs. 50,000 per month and a variable cost ...
Understanding Total Costs
To find the value at which the total costs of processes X and Y are equal, we will first define the total cost formula for each process.
Total Cost Formula
- Process X:
- Fixed Cost = Rs. 50,000
- Variable Cost = Rs. 10 per unit
- Total Cost (TC_X) = Fixed Cost + (Variable Cost per unit * Number of units)
- TC_X = 50,000 + 10 * Q
- Process Y:
- Fixed Cost = Rs. 20,000
- Variable Cost = Rs. 25 per unit
- Total Cost (TC_Y) = Fixed Cost + (Variable Cost per unit * Number of units)
- TC_Y = 20,000 + 25 * Q
Setting the Total Costs Equal
To find the quantity (Q) where the total costs of processes X and Y are equal, we set TC_X equal to TC_Y:
- 50,000 + 10 * Q = 20,000 + 25 * Q
Solving for Q
1. Rearranging the equation:
50,000 - 20,000 = 25 * Q - 10 * Q
30,000 = 15 * Q
2. Dividing both sides by 15:
Q = 30,000 / 15
Q = 2,000 units
Conclusion
The total costs of processes X and Y will be equal when the quantity produced is 2,000 units. Therefore, the correct answer is option D: 2000.
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Process Xhas a fixed cost of Rs. 50,000 per month and a variable cost of Rs. 10 per unit. Process Y has a fixed cost of Rs. 20,000 per month and a variable cost of Rs. 25 unit. At which value, total costs of processes X and Y will be equala)1200b)1400c)1800d)2000Correct answer is option 'D'. Can you explain this answer?
Question Description
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