Enter the total variable costs and change in quantity into the marginal cost calculator below. This calculator estimates the marginal cost. Marginal cost refers to the cost of producing 1 additional unit or cost change per unit.
Marginal Cost Formula
MC = CVC / CQ
- MC is marginal cost
- CVC is change in total variable costs
- CQ is the change in quantity.
- Where MC is marginal cost
- MR is marginal revenue
What is marginal cost?
As mentioned above, marginal cost is the total cost that occurs when increasing production by one unit. You may be thinking, isn’t that just the cost per unit? In short, it’s more complicated than that.
For example, let’s say you have a machine that can produce 1,000 units of some item. For that machine and 1,000 units, you get some cost X per unit.
Now let’s imagine you want to increase that quantity to 1100 units. Great, the cost will just be X times 1100 units! Wrong, because the machine you have can only produce 1000 units, you must purchase a new machine and operator for those additional 100 units.
This leads to an extremely large marginal cost increase since the variable cost dramatically increased and the quantity only increase by 10%.
As you can see, the marginal cost of an object is not as simple as understanding the previous per unit cost.
How to calculator marginal cost
There are three steps in calculating the marginal cost. First, you must determine the total increase in the quantity you wish to calculate. This is the easy step.
Next, you need to calculate the increase in variable cost due to that increase in quantity. This is much more difficult. The variable cost includes material cost, operation costs, energy consumption costs, and so on.
Finally, the marginal cost can be calculated using the formula above. For example, let’s say the increase in quantity was 100 and the increase in variable cost is $5. The marginal cost would be:
MC = CVC / CQ
MC = 5$ / 100
MC = .05 $/unit
A marginal cost is a change in total production cost associated with one unit.