Question

"lan A has a fixed cost of $10 and a variable cost of $0.05 per minute $0.10 per MB. Plan B has no fixed cost and a variable cost of $0.25 per minute $0.20 per MB. What is the point of indifference between the two plans

Answer 1

Answer:

The indifference point is 50 minutes.

Explanation:

Giving the following information:

A has a fixed cost of $10 and a variable cost of $0.05 per minute $0.10 per MB. Plan B has no fixed cost and a variable cost of $0.25 per minute $0.20 per MB.

First, we need to formulate the cost equation for each of the plans.

Plan A:

Total cost= 10 + 0.05*x

Plan B:

Total cost= 0.25*x

X= minutes

To determine the indifference point, we need to equal both formulas:

10 + 0.05x= 0.25x

10/0.20= x

50=x

The indifference point is 50 minutes.