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Unformatted text preview: #2 Current VC New VC Reduction = VC 2 Then Asset 1 Asset 2 Asset 1 FC + (VC1 Indifference Point) = Asset 2 FC + (VC2 Indifference Point ) Indifference point will be what we are looking for to determine at what point to purchase which asset. It will be a variable in which you solve for in this equation. Difference Formula Cost for Purchasing = Cost for Making Cost per Item (x) = FC + VC (x) solve for x Use x from previous equation (x) / Capacity = Percentage of Capacity Reduce Variable and Fixed Costs 1. QTY TFC TR C V / ) (= 2. TVC TR C F= Raise the Price ) / ( QTY FC VC P + =...
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 Spring '10
 Patterson
 Management

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