This marginal cost of production template will show you how to calculate different types of marginal costs.
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The Marginal Cost of production is the cost to provide one additional unit of a product or service. It is a fundamental principle to derive economically optimal decisions and an important aspect of managerial accounting and financial analysis. It can be calculated as:
Marginal Cost = Change in Cost / Change in Quantity
If a company’s total cost of production is defined as:
TC = FC + (VC x Q)
Then its marginal cost is the first-order derivative of the total cost function. In this case, the marginal cost is directly equal to its variable costs.
MC = dTC / dQ = VC
TC: Total Cost
FC: Fixed Cost
VC: Variable Cost
MC: Marginal Cost
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