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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
- Management, Generally Accepted Accounting Principles, TFC, VC Per Unit, VC- New VC