1. Calculate Point Of Indifference Between Two Different Cost Scenarios
Principles of Cost Analysis and Management
Show Slide #1: Calculate the Point of Indifference Between Two Different Cost Scenarios
References: FM 1-06, Slides, Handouts, Excel Spreadsheets
Facilitator Material: Each primary facilitator should possess a lesson plan, slide deck, course handouts, and practical exercise, and FM All required references and technical manuals will be provided by the School House
Learner Material: Learners should possess standard classroom supplies, course handouts, practical exercises, FM All required references and technical manuals will be provided by the School House.
Facilitator Actions: Classroom Setup 30 minutes, Student Re-test: 3 hours, Student Re-train 2 hours, Grade Test 30 minutes
Testing Requirements/Assessment:
Learners will take the Principles of Cost Analysis and Management 3 Exam at the end of Week Three. Learners must score 80% or higher and International officers must score 70% or higher.

2. What would you do for a Klondike Bar
What would you do for a Klondike Bar? It’s essentially a Cost/Benefit Analysis!
Show Slide #2: Concrete Experience
Facilitator’s Note: (Concrete Experience 10 minutes) Discuss with students what is meant by Calculating the Point of Indifference Between Two Different Cost Scenarios? Does Tradeoff have anything to do with this? Ask students what their thoughts on the discussion.
Facilitator’s Note: (Publish and Process 10 minutes) The critical portion of this part of the ELM process is to force the students to reflect. Ask a series of thought influencing questions, for example:
Q1: Are there cost expressions for different plans?. Ask each one to expand on their personal?
This is a good chance to find out what students understand about Indifference Points. Let them give their suggestions and write them up on the board. Depending upon the students’ level of sophistication and knowledge, you will get answers from that range from:
Crunch numbers
Prepare reports
Keep records
Etc.

3. Terminal Learning Objective
Action: Calculate Point of Indifference Between Two Different Cost Scenarios that Share a Common Variable
Condition: You are a cost analyst with knowledge of the operating environment and access to all course materials including handouts and spreadsheet tools
Standard: With at least 80% accuracy:
Distinguish Tradeoff / Indifference Point
Apply Indifference Point to a COA
Examine Indifference Point Examples
Solving for Tradeoffs under Uncertainty
Show Slide #3: TLO
Action: Calculate the Point of Indifference Between Two Different Cost Scenarios
Condition: You are a cost analyst with knowledge of the operating environment and access to all course materials including handouts and spreadsheet tools.
Standard: With at least 80% accuracy (70% for international Learners) you must:
Distinguish Tradeoff / Indifference Point
Apply Indifference Point to a COA
Examine Indifference Point Examples
Solving for Tradeoffs under Uncertainty
Safety Requirements: In a training environment, leaders must perform a risk assessment in accordance with DA PAM , Risk Management. Leaders will complete a DD Form 2977 DELIBERATE RISK ASSESSMENT WORKSHEET during the planning and completion of each task and sub-task by assessing mission, enemy, terrain and weather, troops and support available-time available and civil considerations (METT-TC). Local policies and procedures must be followed during times of increased heat category in order to avoid heat related injury. Consider the work/rest cycles and water replacement guidelines IAW TRADOC Regulation
Environmental Considerations: Environmental protection is not just the law but the right thing to do. It is a continual process and starts with deliberate planning. Always be alert to ways to protect our environment during training and missions. In doing so, you will contribute to the sustainment of our training resources while protecting people and the environment from harmful effects. Refer to FM Environmental Considerations and GTA ENVIRONMENTAL-RELATED RISK ASSESSMENT.
Instructional Lead in: This is a good chance to find out what students understand about accounting. Let them give their suggestions and write them up on the board. Depending upon the students’ level of sophistication and knowledge, you will get answers from that range from: Crunch numbers, prepare reports, Keep records, Etc. Throughout the lesson discussion seek opportunities to link the competencies with the lesson content through the student’s experiences.

4. What is Tradeoff / Indifference Point?
Life is full of tradeoffs
What we give up could be visualized as a “cost”
What we receive could be labeled a “benefit”
The transaction occurs when the benefit is equal to or greater than the cost
Point of equilibrium: the point where cost is equal to benefit received.
Will Work
for
Food
Show Slide #4: What is Tradeoff/Indifference Point?
1. Learning Step Activity 1: Distinguish Tradeoff / Indifference Point
Method of Instruction: DSL (large or small group discussion)
Facilitator to Student Ratio: 2:25
Time of Instruction: 15 Minutes
Media: Slides, Printed Reference Material
Facilitator's Note: Before facilitating this lesson, ask the students which of the 21st Century Soldier Competency do they think pertain to this lesson? Facilitate a discussion on the answers given and at the end of the lesson revisit it and see if the students still believe their choice are the same.
Note: For this lesson these competencies should be talked about.
Communication and Engagement (Oral, written, and negotiation)
Critical thinking, intergovernmental, and multinational competence
Tactical and Technical Competence
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Life is full of tradeoffs
What we give up could be visualized as a “cost”
What we receive could be labeled a “benefit”
The transaction occurs when the benefit is equal to or greater than the cost
Point of equilibrium: the point where cost is equal to benefit received

5. What is Tradeoff / Indifference Point (Cont.)?
Identifies the point of equality between two differing cost expressions with a common unknown variable
“Revenue” and “Total Cost” are cost expressions with “Number of Units” as the common variable:
Revenue = $Price/Unit * #Units
Total Cost = ($VC/Unit * #Units) + Fixed Cost
Show Slide #5: What is Tradeoff/Indifference Point?
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Identifies the point of equality between two differing cost expressions with a common unknown variable
“Revenue” and “Total Cost” are cost expressions with “Number of Units” as the common variable:
Revenue = $Price/Unit * #Units
Total Cost = ($VC/Unit * #Units) + Fixed Cost

6. Revenue – Total Cost = Profit
Trade-off Theory
Breakeven Point is the point where:
Revenue – Total Cost = Profit
Revenue – Total Cost = 0
Revenue = Total Cost
Setting two cost expressions with a common variable equal to one another will yield the breakeven or tradeoff point
Show Slide #6: What is Tradeoff ?
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Explain formula of Breakeven point.
Breakeven Point is the point where:
Revenue – Total Cost = Profit
Revenue – Total Cost = 0
Revenue = Total Cost
Setting two cost expressions with a common variable equal to one another will yield the breakeven or tradeoff point

7. What is an Indifference Point?
The point of equality between two cost expressions with a common variable
Represents the “Decision Point” or “Indifference Point”
Level of common variable at which two alternatives are equal
Above indifference point, one of the alternatives will yield lower cost
Below indifference point, the other alternative will yield lower cost
Show Slide #7: What is an Indifference Point?
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
The point of equality between two cost expressions with a common variable
Represents the “Decision Point” or “Indifference Point”
Level of common variable at which two alternatives are equal
Above indifference point, one of the alternatives will yield lower cost
Below indifference point, the other alternative will yield lower cost

8. Indifference Point Applications
Evaluating two machines that perform the same task
i.e. Laser printer vs. inkjet
Low usage level favors the inkjet, high usage favors the laser, but at some point they are equal
Outsourcing decisions
What level of activity would make outsourcing attractive?
What level would favor insourcing?
At what level are they equal?
Show Slide #8: Indifference Point Applications
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Evaluating two machines that perform the same task
i.e. Laser printer vs. inkjet
Low usage level favors the inkjet, high usage favors the laser, but at some point they are equal
Outsourcing decisions
What level of activity would make outsourcing attractive?
What level would favor insourcing?
At what level are they equal?

9. LSA #1 Check on Learning
Q1. What is an indifference point or tradeoff point?
A1. An indifference point is the point where two options are equal. It is generally stated in terms of a common variable. Above the indifference point, one of the alternatives will yield lower cost or be more favorable. Below indifference point, the other alternative will yield lower cost or be more favorable.
Q2. What is an example of an application of indifference points?
A2. Evaluating the cost of two machines that perform the same task, or outsourcing decisions.
Show Slide #9: LSA #1 Check on Learning
Facilitator’s Note: Ask check on learning question, facilitate discussion on answer given.
Q1. What is an indifference point or tradeoff point?
A1. An indifference point is the point where two options are equal. It is generally stated in terms of a common variable. Above the indifference point, one of the alternatives will yield lower cost or be more favorable. Below indifference point, the other alternative will yield lower cost or be more favorable.
Q2. What is an example of an application of indifference points?
A2. Evaluating the cost of two machines that perform the same task, or outsourcing decisions.

10. LSA #1 Summary
In this block of instruction, we discussed Indifference Points and Tradeoff theories.
Show Slide #10: LSA #1 Summary
Facilitator's Note: In this block of instruction, we discussed Indifference Points and Tradeoff theories. Students will apply this block and expound on their personal experience and how it relates.

11. Indifference Point Applications
Evaluating two Courses of Action:
Cell phone data plan
Plan A costs $.50 per MB used
Plan B costs $20 per month + $.05 per additional MB
Plan A is the obvious choice if usage is low
Plan B is the obvious choice if usage is high
What is the Indifference Point?
The number of MB used above which Plan B costs less, below which Plan A costs less?
Show Slide #11: Indifference Point Application
2. Learning Step Activity 2: Apply Indifference Point to a COA
Method of Instruction: DSL (large or small group discussion)
Facilitator to Student Ratio: 2:25
Time of Instruction: 15 Minutes
Media: Slides, Printed Reference Material
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Evaluating two Courses of Action:
Cell phone data plan
Plan A costs $.50 per MB used
Plan B costs $20 per month + $.05 per additional MB
Plan A is the obvious choice if usage is low
Plan B is the obvious choice if usage is high
What is the Indifference Point?
The number of MB used above which Plan B costs less, below which Plan A costs less?

12. Plan A vs. Plan B What is the cost expression for Plan A?
$.50 * # MB
What is the cost expression for Plan B?
$20 + $.05 *# MB
What is the common variable?
# MB used
Show Slide #12: Plan A vs. Plan B
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Solicit the audience with the following questions:
What is the cost expression for Plan A?
$.50 * # MB
What is the cost expression for Plan B?
$20 + ($.05 *# MB)
What is the common variable?
# MB used

13. Solving for Indifference Point
Set the cost expressions equal to each other:
$.50 * # MB = $20 + ($.05 *# MB)
$.50 * # MB - $.05 *# MB = $20
$.45 * # MB = $20
# MB = $20/$.45
# MB = 20/.45
# MB = 44.4
$.50 * # MB - $.05 *# MB = $20
$.45 * # MB = $20
# MB = $20/$.45
Show Slide #13: Solving for Indifference Point
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Provide answers for application:
Set the cost expressions equal to each other:
$.50 * # MB = $20 + $.05 *# MB
$.50 * # MB - $.05 *# MB = $20
$.45 * # MB = $20
# MB = $20/$.45
# MB = 20/.45
# MB = 44.44
# MB = $20/$.45
# MB = 20/.45
# MB = 44.44

14. Cost of Plan B starts at $20 but increases slowly with usage
Plan A vs. Plan B Graphed $
Cost of Plan A is zero when usage is zero, but increases rapidly with usage
Cost of Plan B starts at $20 but increases slowly with usage
Show Slide #14: Plan A vs. Plan B Graphed
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Graph Representation: Explain that Cost of Plan A is zero when usage is zero, but increases rapidly with usage.
Cost of Plan B starts at $20 but increases slowly with usage
X Axis = Number of MB Used
Cost of both plans increases as # MB increases
44.44

15. Proof Plug the solution into the original equation:
$.50 * # MB = $20 + $.05 * # MB
$.50 * MB = $20 + $.05 * MB
$22.22 = $20 + $2.22
$22.22 = $22.22
Show Slide #15: Proof
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Solved:
$.50 * # MB = $20 + $.05 * # MB
$.50 * MB = $20 + $.05 * MB
$22.22 = $20 + $2.22$22.22 = $22.22

16. Interpreting the Results
Decision: Will you use more or less than MB per month?
Using less than MB per month makes Plan A the better deal
Using more than MB per month makes Plan B the better deal
What other factors might you consider when making the decision?
Show Slide #16: Interpreting the Results
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Decision: Will you use more or less than MB per month?
Using less than MB per month makes Plan A the better deal
Using more than MB per month makes Plan B the better deal
What other factors might you consider when making the decision?

17. Indifference Points Spreadsheet
Enter data to compare two multivariate cost scenarios
i.e. Cell phone data plans
Show Slide #17: Indifference Points Spreadsheet
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Explanation / spreadsheet navigation Option A Vs. Option B.
Solve for Breakeven level of Usage

18. Indifference Points Spreadsheet (Cont.)
Enter different quantities to compare the
cost of both options for various levels of usage
Show Slide #18: Indifference Points Spreadsheet
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
View which option is better.
See which option is more favorable at a given level

19. LSA #2 Check on Learning
Q1. How would you find the indifference point between two cost options with a common variable? A1. Set the two equations equal to one another and solve for the breakeven level of the common variable. Q2. You are taking your children to the zoo. You can purchase individual tickets ($15 for one adult and $5 per child) or you can purchase the family ticket for $30. What common variable will allow you to calculate an indifference point? A2. Number of children (treat the adult as a fixed cost in the individual ticket option)
Show Slide #19: LSA #2 Check on Learning
Facilitator’s Note: Ask check on learning question, facilitate discussion on answer given.
Q1. How would you find the indifference point between two cost options with a common variable?
A1. Set the two equations equal to one another and solve for the breakeven level of the common variable.
Q2. You are taking your children to the zoo. You can purchase individual tickets ($15 for one adult and $5 per child) or you can purchase the family ticket for $30. What common variable will allow you to calculate an indifference point?
A2. Number of children (treat the adult as a fixed cost in the individual ticket option)

20. LSA #2 Summary
During this lesson, we set up, solved and discussed putting Indifference points into practical application beginning with a simple formula. It was then graphed and plotted into the spreadsheets provided for this lesson.
Show Slide #20: LSA #2 Summary
Facilitator's Note: In this block of instruction we cover those areas with the students that may have seemed confusing. Let them know that, during this lesson, we set up, solved and discussed putting Indifference points into practical application beginning with a simple formula. It was then graphed and plotted into the spreadsheets provided for this lesson.

21. Indifference Point Example
A six-pack of soda costs $2.52 and contains 72 ounces of soda
A two-liter bottle of the same soda contains 67.2 ounces of soda
What price for the two-liter bottle gives an equal value?
The common variable is cost per ounce
Show Slide #21: Indifference Point Example(s)
3. Learning Step Activity 3: Examine Indifference Point Examples
Method of Instruction: DSL (large or small group discussion)
Facilitator to Student Ratio: 2:25
Time of Instruction: 20 Minutes
Media: Slides, Printed Reference Material
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
A six-pack of soda costs $2.52 and contains 72 ounces of soda
A two-liter bottle of the same soda contains 67.2 ounces of soda
What price for the two-liter bottle gives an equal value?
The common variable is cost per ounce
Facilitator’s Note: After the examples and figures are given, ask the following questions;
Q. What is the expression for cost per ounce for the six pack?
A1. $2.52/72 oz.
Q. What is the expression for cost per ounce for the two-liter bottle?
A2. $Price/67.2 oz.

22. Solving for Breakeven Price
Set the two cost expressions equal to one another:
Cost per oz. of two-liter = Cost per oz. of six-pack
$Price/67.2 oz. = $2.52/72 oz.
$Price/67.2 oz. = $.035/oz.
$Price = $.035/oz. * 67.2 oz.
$Price = $.035 * 67.2
$Price = approximately $2.35
$Price/67.2 oz. = $.035/oz.
$Price = $.035/oz. * 67.2 oz.
$Price = $.035 /oz. * 67.2 oz.
$Price = $.035 * 67.2
Show Slide #22: Solve for the Breakeven Price
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Set the two cost expressions equal to one another:
Cost per oz. of two-liter = Cost per oz. of six-pack
$Price/67.2 oz. = $2.52/72 oz.
$Price = approximately $2.35

23. Cost of 6-pack is known so
Six-Pack vs. Two-Liter
Cost of 6-pack is known so
Cost per oz. is constant
Cost Per Ounce
Show Slide #23: Six-Pack vs. Two-Liter
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
6 pack vs. 2 liter comparison. Calls for discussion.
$2.35
X Axis = Unknown Price of 2-Liter
As Price of 2-liter increases, cost per oz. increases

24. Interpreting the Results
If the price of the two-liter is less than $2.35, it is a better deal than the six-pack
What other factors might you consider when making your decision?
Show Slide #24: Interpreting the results
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Questions on the given problem.
If the price of the two-liter is less than $2.35, it is a better deal than the six-pack
What other factors might you consider when making your decision?

25. Indifference Points Spreadsheet
Enter Data for two different cost per unit options,
i.e. cost per ounce of soda
Show Slide #25: Indifference Points Spreadsheet
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Enter cost of six-pack and number of ounces
Enter number ounces in a 2-liter
Solve for breakeven price

26. LSA #3 Check on Learning
Q1. When solving for an indifference point, what two questions should you ask yourself first? A1. What is the common variable? What are the known quantities?
Show Slide #26: LSA #3 Check on Learning
Facilitator’s Note: Ask check on learning question, facilitate discussion on answer given.
Q1. When solving for an indifference point, what two questions should you ask yourself first?
A1. What is the common variable? What are the known quantities?

27. LSA #3 Summary
During this lesson, we set up, solved and discussed putting Indifference points into practical application beginning with a simple formula. It was then graphed and plotted into the spreadsheets provided for this lesson.
Show Slide #27: LSA #3 Summary
Facilitator’s Note: During this lesson, we set up, solved and discussed putting Indifference points into practical application beginning with a simple formula. It was then graphed and plotted into the spreadsheets provided for this lesson.

28. Tradeoffs Under Uncertainty
Review: Expected Value =
Probability of Outcome1 * Dollar Value of Outcome1 +
Probability of Outcome2 * Dollar Value of Outcome2
Probability of Outcome3 * Dollar Value of Outcome3
etc.
Assumes probabilities and dollar value of outcomes are known or can be estimated
Show Slide #28: Tradeoffs Under Uncertainty
4. Learning Step Activity 4: Solving for Tradeoffs Under Uncertainty
Method of Instruction: DSL (large or small group discussion)
Facilitator to Student Ratio: 2:25
Time of Instruction: 15 Minutes
Media: Slides, Printed Reference Material
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Review: Expected Value =
Probability of Outcome1 * Dollar Value of Outcome1 +
Probability of Outcome2 * Dollar Value of Outcome2
Probability of Outcome3 * Dollar Value of Outcome3
etc.
Assumes probabilities and dollar value of outcomes are known or can be estimated

29. What if Probability is Unknown?
Solve for Breakeven Probability
Look for what IS known and what relationships exist
Compare two alternatives:
One has a known expected value
Example: Only one outcome with a known dollar value and probability of 100%
The other has two possible outcomes with unknown probability
Show Slide #29: What if Probability is Unknown?
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Solve for Breakeven Probability
Look for what IS known and what relationships exist
Compare two alternatives:
One has a known expected value
Example: Only one outcome with a known dollar value and probability of 100%
The other has two possible outcomes with unknown probability

30. Solving for Breakeven Probability
Subscribe to automatic online hard drive backup service for $100 per year
-OR-
Do not subscribe to the backup service
Pay $0 if your hard drive does not fail
Pay $1000 to recover your hard drive if it does fail.
Show Slide #30: Solving for Breakeven Probability
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Subscribe to automatic online hard drive backup service for $100 per year
-OR-
Do not subscribe to the backup service
Pay $0 if your hard drive does not fail
Pay $1000 to recover your hard drive if it does fail.

31. Solving for Breakeven Probability (Cont.)
What is the cost expression for the expected value of the backup service?
What is the outcome or dollar value?
$100
What is the probability of that outcome?
100%
So, the cost expression is:
$100*100%
$100
100%
$100*100%
Show Slide #31: Solving for Breakeven Probability
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
What is the cost expression for the expected value of the backup service?

32. Solving for Breakeven Probability (Cont.)
What is the cost expression for not subscribing to the online backup service?
What are the outcomes and dollar values?
Hard drive failure = $1000
No hard drive failure = $0
How would you express the unknown probability of each outcome?
Probability% of hard drive failure = P
Probability% of no hard drive failure = 100% - P
So, the cost expression is:
$1000*P + $0*(100% - P)
Hard drive failure = $1000
No hard drive failure = $0
Probability% of hard drive failure = P
Probability% of no hard drive failure = 100% - P
Show Slide #32: Solving for Breakeven Probability
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
What is the cost expression for not subscribing to the online backup service?
What are the outcomes and dollar values?
Hard drive failure = $1000
No hard drive failure = $0
How would you express the unknown probability of each outcome?
Probability% of hard drive failure = P
Probability% of no hard drive failure = 100% - P
So, the cost expression is:
$1000*P + $0*(100% - P)

33. Solving for Breakeven Probability (Cont.)
Set the two expressions equal to one another:
EV of not subscribing = EV of subscribing
$1000*P + $0*(100% - P) = $100*100%
$1000*P = -$100*100%
$1000*P = -$100
P = $100/$1000
P = .1 or 10%
Show Slide #33: Solving for Breakeven Probability
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Set the two expressions equal to one another:
EV of not subscribing = EV of subscribing
$1000*P + $0*(100% - P) = $100*100%
$1000*P = -$100*100%
$1000*P = -$100
P = $100/$1000
P = .1 or 10%

34. Cost of subscription is known so Expected Value is constant
Graphic Solution
Cost of subscription is known so
Expected Value is constant
Show Slide #34: Graphic Solution
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Facilitator Note: Graphic Representation
X Axis = Probability of hard drive failure
As probability increases, expected value (cost) increases

35. Interpreting the Results
If the probability of hard drive failure is greater than 10%, then the backup service is a good deal
If the probability of hard drive failure is less than 10%, then the backup service may be overpriced
What other factors might you consider in this case?
Show Slide #35: Interpreting the Results
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
If the probability of hard drive failure is greater than 10%, then the backup service is a good deal
If the probability of hard drive failure is less than 10%, then the backup service may be overpriced
What other factors might you consider in this case?

36. Indifference Points Spreadsheet
Solve for breakeven Probability
Show Slide #36: Indifference Points Spreadsheet
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Facilitator Note: Graphic Representation
Define the two options you are comparing

37. Indifference Points Spreadsheet
Enter known data for both options
Solve for unknown probability
Show Slide #37: Indifference Points Spreadsheet
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
Facilitator Note: Graphic Representation
See how expected value changes
as probability changes

38. What If?
What if the cost of recovering the hard drive is $2000? What is the breakeven probability?
What if the cost of the backup service is $50? $500?
Show Slide #38: What If?
Facilitator’s Note: (Facilitator read and facilitate discussion using the slide)
What if the cost of recovering the hard drive is $2000? What is the breakeven probability?
What if the cost of the backup service is $50? $500?

39. LSA #4 Check on Learning Q1. What is the equation for expected value?
A1. Probability of Outcome1 * Dollar Value of Outcome1 + Probability of Outcome2 * Dollar Value of Outcome2 + Probability of Outcome3 * Dollar Value of Outcome3, etc.
Q2. Which value is represented by a horizontal line on the graph of breakeven probability?
A2. The expected value where both the probabilities and cash flows are known is represented by a horizontal line.
Show Slide #39: LSA #4 Check on Learning
Facilitator’s Note: Ask check on learning question, facilitate discussion on answer given.
Q1. What is the equation for expected value?
A1. Probability of Outcome1 * Dollar Value of Outcome1 + Probability of Outcome2 * Dollar Value of Outcome2 + Probability of Outcome3 * Dollar Value of Outcome3, etc.
Q2. Which value is represented by a horizontal line on the graph of breakeven probability?
A2. The expected value where both the probabilities and cash flows are known is represented by a horizontal line.

40. LSA #4 Summary
During this lesson, we set up, solved and discussed Breakeven Probabilities into practical application beginning with a simple formula. It was then graphed and plotted into the spreadsheets provided for this lesson.
Show Slide #40: LSA #4 Summary
Facilitator’s Note: During this lesson, we set up, solved and discussed Breakeven Probabilities into practical application beginning with a simple formula. It was then graphed and plotted into the spreadsheets provided for this lesson.

41. TLO Summary
Action: Calculate Point of Indifference Between Two Different Cost Scenarios that Share a Common Variable
Condition: You are a cost analyst with knowledge of the operating environment and access to all course materials including handouts and spreadsheet tools
Standard: With at least 80% accuracy:
Distinguish Tradeoff / Indifference Point
Apply Indifference Point to a COA
Examine Indifference Point Examples
Solving for Tradeoffs under Uncertainty
Show Slide #41: TLO Summary
Facilitator’s Note: Restate the TLO
Action: Calculate the Point of Indifference Between Two Different Cost Scenarios
Condition: You are a cost analyst with knowledge of the operating environment and access to all course materials including handouts and spreadsheet tools.
Standard: With at least 80% accuracy (70% for international Learners) you must:
Distinguish Tradeoff / Indifference Point
Apply Indifference Point to a COA
Examine Indifference Point Examples
Solving for Tradeoffs under Uncertainty
Or –
Facilitator at this time, have one student from each group to explain the most important take away to them from this lesson. Facilitate a discussion on each answer.

42. Practical Exercises Show Slide #42: Practical Exercise
Facilitator’s Note: At this time have learners log onto Black board and use the excel spreadsheet to record all their work.