Marginal Cost of Production Template

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

Where:

TC: Total Cost

FC: Fixed Cost

Q: Quantity

VC: Variable Cost

MC: Marginal Cost

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