Enter the differential fixed costs and the differential variables costs per unit into the calculator to determine the cost indifference point.

Cost Indifference Point Formula

The following formula is used to calculate a cost indifference point.

CIP = DFC / DVCU

  • Where CIP is the cost indifference point
  • DFC is the differential fixed costs
  • DVCU is the differential variable costs per unit

To calculate the Cost Indifference Point, divide the differential fixed costs by the differential variable costs per unit.

What is a Cost Indifference Point?

Definition:

A Cost Indifference Point is a financial measure of the point at which to alternative investments are equal.

How to calculate a Cost Indifference Point?

Example Problem:

The following example outlines how to calculate a Cost Indifference Point.

First, determine the differential fixed costs. In this example, the differential fixed costs are calculated to be $10,000.00.

Next, determine the differential variable costs per unit. In this case, the differential variable costs per unit is equal to $500.00.

Finally, calculate the Cost Indifference Point using the formula above:

CIP = DFC / DVCU

CIP = 10,000 /500

CIP = 20 units