Cost Indifference Point Calculator
Method 1
Variable Cost 1 =
Fixed Cost 1 =
Method 2
Variable Cost 2 =
Fixed Cost 2 =
Indifference Point =
Help
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.
Examples
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
Keywords
Variable Cost 1
Fixed Cost 1
Variable Cost 2
Fixed Cost 2
Indifference Point
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