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you run a nail salon. fixed monthly cost is $5,341.00 for rent and utilities, $6,330.00 is spent in salaries and $1,180.00 in insurance. also every customer requires approximately $3.00 in supplies. you charge $99.00 on average for each service. you are considering moving the salon to an upscale neighborhood where the rent and utilities will increase to $11,943.00, salaries to $6,616.00 and insurance to $2,438.00 per month. cost of supplies will increase to $8.00 per service. however you can now charge $155.00 per service. at what point will you be indifferent between your current location and the new location?

Respuesta :

Cost indifference point is a situation where a firm compare the costs and relatable profits under two possible alternatives. The indifferent point of given situation would be 1630 approx. customers .

What is indifferent point?

The volume at which total cost and profits are equal under both cost structures is known as the indifference point. The alternative would not matter if the business functioned at that volume because the income would be the same at either way.

Cost Indifference point can be computed by two methods follows:

A) Cost Indifference Point = Differential fixed cost/Differential variable cost per unit

or

B) Total Cost for Alternative one  = Total Cost for Alternative two

Answer as per Method A

> Differential fixed cost = New - Old = $(11943+6616+2438) -  
                                                                $(5341+6330+1180) = $8146.

> Differential variable cost per unit = $8-$3 =$5.

Now IC will be = $8146÷$5 = 1629.20 customers.

Answer as per Method B, let no. of customers will be Q

          $20997 + 3Q = $12851 + 8Q

                                   = 1629.20 or 1629 customers.

To know more about indifferent point refer:

https://brainly.com/question/29222231

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