Enter the change in total relevant cost (ΔTC, $) and the change in quantity (ΔQ, units) into the Incremental Cost Calculator to compute incremental cost per unit. Use the other tabs to include avoidable fixed costs, one-time/step-fixed costs, and opportunity costs, or to evaluate a special order. 

Incremental Cost Calculator

Enter any 2 values to calculate the missing one

Incremental Cost Formula

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

IC_{\text{per unit}} = \frac{\Delta TC}{\Delta Q}
  • Where IC is the incremental cost per unit ($/unit)
  • ΔTC is the change in total relevant cost ($) (variable costs plus any avoidable fixed, step-fixed, one-time, and opportunity costs that change because of the decision)
  • ΔQ 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 ΔTC ≈ ΔVC 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 (ΔTC, $). The change in total relevant cost ($) is given as 130.
  2. Next, determine the change in quantity (ΔQ). The change in quantity is provided as 30.
  3. Finally, calculate the incremental cost per unit using the equation above: 

IC = ΔTC / ΔQ

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)