Variable Cost 1 =

Fixed Cost 1 =

Variable Cost 2 =

Fixed Cost 2 =

Indifference Point =

The cost indifference point analysis tool determines the point at which there is no difference in cost between two alternative methods. Used to compare two strategies, this analysis can be used to decide between different cost structures or selling prices.

To use:

Enter the fixed costs (FC1) and variable costs (VC1) for data set 1

Enter fixed costs (FC2) and variable costs (VC2) for data set 2

N will equal the cost indifference point

Submission by Tamarly.

Determining the Indifference Point

Compute the volume of sales, in units, for which there is indifference between the two alternatives.

The indifference point in units is the Q for which the profit equations of the two alternatives are equal.

Q= indifference point Current Plan Proposed Plan

Contribution margin per unit. $120 $90

Total fixed costs $360,000 $315,000

Profit (current plan) $120Q - $360,000

Profit (proposed plan $90Q - $315,000

$120Q - $360,000 = $90Q - $315,000

$30Q = $45,000

Q = 1,500 units

How to enter these values in template:

FC1=$360,000

VC1=$120

FC2= $315,000

VC2= $90

Variable Cost 1

Fixed Cost 1

Variable Cost 2

Fixed Cost 2

Indifference Point

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