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Point of Indifference

This analysis is for graduate level Operations Managment course.

Consider the mathematical model for point of indifference:

Company XYZ is considering a location move. The selling price of $10 per customer will stay the same. The company's goal is to make money now and in the future.

Current State: Fixed Cost $2,000, Variable Cost $5
Future State: Fixed Cost $12,000, Variable Cost $2

1. How many customers do you need to invest in the new fixed cost of $12,000 and move to the new location?

2. What is the difference between a breakeven point model and the point of indifference model?

Solution Preview

This analysis is for graduate level Operations Managment course.

Consider the mathematical model for point of indifference:

Company XYZ is considering a location move. The selling price of $10 per customer will stay the same. The company's goal is to make money now and in the future.

Current State: Fixed Cost $2,000, Variable Cost $5
Future State: Fixed Cost $12,000, Variable Cost $2

1. How many customers do you need to invest in the new fixed cost of $12,000 and move to the new location?

2. What is the difference between a breakeven ...

Solution Summary

This solution shows step-by-step calculations to determine the fixed cost with respect tot he variable cost and factor x, and it also differentiates between the breakeven point model and the point of indifference.

$2.19