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I may be a simpleton, but this works for me. Here is the logic -
1/2 the OD of the bushing puts the center of your bit at that location. Cutting there would be taking off 1/2 of the diameter of the bit more than you should be. Adjust your final cut line by adjusting the diameter of the bushing so that the bit is moved 1/2 of it's diameter either in or out depending on what you want to accomplish. Or if you have an adjustable template like a hinge guide you adjust it accordingly.
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