![]() ![]() It is also possible at a particular level of activity one production method is superior to another, and vice versa. There may be two methods or two alternatives of doing a thing, say two methods of production. At the cost indifference point, total costs (fixed cost and variable cost) associated with the two alternatives are equal. If the company operated at that level of volume, the alternative used would not matter because income would be the same either way. The indifference point is the level of volume at which total costs, and hence profits, are the same under both cost structures. Indifference Point: Formula and Calculation!Īnother important tool that managers use to help them choose between alternative cost structures is the indifference point.
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