Select a calculation to find incremental cost per unit, total cost, quantity change, or special order profit. Monetary inputs and results use USD. Optional relevant costs left blank are zero.

Amounts use USD. Include only costs that change because of the decision; exclude sunk and unchanged allocated costs. Results are estimates, with monetary outputs rounded for display.

Incremental Cost Formula

The following formula is used to calculate incremental cost per unit over a specified change in output. 

ICper unit = (ฮ” TC) / (ฮ” Q)
  • Where IC is the incremental cost per unit ($/unit)
  • ฮ”TC is the change in total relevant cost ($) (variable costs plus any avoidable fixed, step-fixed, one-time, and opportunity costs that change because of the decision)
  • ฮ”Q is the change in quantity (units)

To calculate incremental cost per unit, divide the change in total relevant cost by the change in quantity. If fixed costs truly do not change over the relevant range, then ฮ”TC โ‰ˆ ฮ”VC and the calculation reduces to a variable-cost-only approximation.

How to Calculate Incremental Cost?

The following example problems outline how to calculate incremental cost per unit.

Example Problem #1:

  1. First, determine the change in total relevant cost (ฮ”TC, $). The change in total relevant cost ($) is given as 130.
  2. Next, determine the change in quantity (ฮ”Q). The change in quantity is provided as 30.
  3. Finally, calculate the incremental cost per unit using the equation above: 

IC = ฮ”TC / ฮ”Q

The values given above are inserted into the equation below:

IC = 130 / 30 = 4.33 ($/unit)

Example Problem #2: 

The variables needed for this problem are provided below:

change in total relevant cost ($) = 200

change in quantity = 50

Entering these values and solving gives:

IC = 200 / 50 = 4 ($/unit)