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