Marginal Cost Calculator

Marginal Cost Calculator

Calculate the marginal cost which is the cost of producing one more unit. Enter the change in total cost and change in quantity into this calculator to find the marginal cost. With the help of these calculations, you can optimize your products' production efficiency and profitability by understanding the impact of increasing output.

Marginal Cost Formula:

The formula for marginal cost is as follows:

MC = ΔTC ΔQ

Marginal Cost = Change in Cost Change in Quantity

Where:

• Change in cost (ΔTC) = It is the difference in the cost of production which is increased by one unit.

• Change in quantity (ΔQ) = It is the increase in number of units produced. 

How to Calculate Marginal Cost?

Follow the steps below to calculate the marginal cost:

• Calculate the change in production cost by adding fixed and variable cost
• Find the change in quantity across a specified period
• Divide these both together (change in cost over change in cost of quantity)

Example:

Assume that a bakery produces 100 types of desserts whose total cost of production is $200. Find their marginal cost when it produces 120 types of desserts within $230.

Calculation:

Change in total cost (ΔTC) = $230 - $200 

= $30

Change in quantity (ΔQ) = 120 - 100 

= 20 desserts

As we know the formula of marginal cost so put the values:

Marginal Cost = ΔTC ΔQ

= $30 20

= $1.50 per 

For the production of each new type of dessert, the marginal cost is $1.5. It can be used to set optimal production levels and prices. Therefore, investors consider it to use the marginal cost calculator to find the company’s profit growth as it gains scale. If the production cost is less than the selling cost, then it means the producer stands to get benefits financially. 

Economies of Scale for Marginal Cost:

Economies of scale occur when a company can increase its production output and lower its average cost per unit. There can be production levels where the marginal cost exceeds the average cost. 

Conversely, the average cost is a minimum at a certain point where the marginal and average costs become equal. This helps to understand the relation between change in cost and change in quantity. 

When plotted on a graph, marginal cost appears as a "U-shaped" curve, reflecting economies of scale followed by an upward trend due to the law of diminishing marginal returns.