How to Find Marginal Cost

Marginal cost is an economic and production calculation that indicates the additional cost of producing a product. You have to know some production variable, such as fixed and variable costs, to find it. You can learn how to find marginal cost using a formula.

Table of Contents

Prepare recipe

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Find or create a table that shows production costs and output. Make sure your table includes the following:

Quantity. You need to reserve the first column for the total amount of product produced. Output can increase one by one, such as 1, 2, 3, 4, etc., or increase by larger distances, such as 1,000, 2,000, 3,000, etc.
Fixed costs and variable costs. During the production process, certain costs, such as the cost of renting a factory, are fixed. Other costs, such as material costs, vary with output. Create a column next to the output column for each of the above costs and fill in the information.

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Get a pen, paper, and calculator. You can also choose to work on a spreadsheet. However, as a beginner, writing formulas will help you better understand how marginal costs are calculated.

Find the total cost

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Place another column with the heading “Total Costs” to the right of the “Fixed Costs” and “Variable Costs” columns.

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Add the fixed and variable costs for each output value.

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Enter the total cost in the column until the full cost of each additional unit has been calculated.

If you’re using a spreadsheet program, you can enter a formula that adds fixed and variable costs to total costs in this column.

Marginal cost formula

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Write the formula “Marginal Cost=Change in Total Cost/Change in Total Output”.

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Create a column to the right of the total cost column with the heading “Marginal Cost”. The first line of the column will be blank because you can’t find marginal cost when there is no production.

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Find the change in total cost by subtracting the total cost in line 3 from the total cost in line 2. 40 VND minus 30 VND.

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Find the change in total output by subtracting the total output in row 3 from the total output in row 2. For example, 2 minus 1.

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Enter numbers in the formula. Example: Marginal Cost=10 VND/1. In this case, the marginal cost is $10.

Things you need

Computer
Production cost table
Pencil/ballpoint pen
Paper
Marginal cost formula
Spreadsheet program (optional)

Steps

Prepare recipe

Find the total cost

Marginal cost formula

Things you need

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