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The Skulls, a student social organization, has two different locations under consideration for constructing a new chapter house. The Skulls' president, a POM student, estimates that due to differing land costs, utility rates, etc., both fixed and variable costs would be different for each of the proposed sites, as follows: Location Annual Fixed Variable Alpha Ave. $ 5,000 $ 200 per person Beta Blvd. $ 8,000 $ 150 per person What would be total annual costs for either location at the point of indifference?

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Answer:

The indifference point is $17,000

Explanation:

Giving the following information:

Location:

Alpha Ave.:

Fixed Costs= $ 5,000

Variable costs= $ 200 per person

Beta Blvd.:

Fixed costs= $ 8,000

Variable costs= $150 per person

We need to find the indifference point.

Alpha= 5000 + 200*x

Beta= 8000 + 150*x

5000 + 200x=8000 + 150x

50x=3000

x= 60

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