The marginal cost is the cost of producing one additional unit of a product. It is an important metric for businesses as it helps determine the profitability of increasing production and guides pricing decisions.
How to Use the Marginal Cost Calculator
To calculate the marginal cost:
- Enter the total cost incurred before increasing production.
- Input the total cost incurred after increasing production.
- Provide the number of additional units produced.
Marginal Cost Formula
The formula to calculate marginal cost is:
Marginal Cost = (Total Cost After - Total Cost Before) / Additional Units Produced
Why Marginal Cost Matters
Understanding marginal costs helps businesses make informed decisions about production levels and pricing strategies. If the marginal cost is lower than the selling price, increasing production can lead to higher profitability.