Marginal cost calculator
Marginal cost is what one more unit costs to make. Enter the quantity and total cost now, and the quantity and total cost at the new level of output. The calculator divides the change in cost by the change in quantity, shows the average cost per unit at both levels and, if you give a price, how much each extra unit adds to profit or takes away.
Runs in your browser: nothing you enter is sent anywhere.
How to use it
- Enter the current quantity and the total cost of producing it.
- Enter the new quantity and its total cost.
- Optionally enter your selling price to compare it with marginal cost.
- Marginal cost = (TC₂ − TC₁) ÷ (Q₂ − Q₁)
- Average total cost = total cost ÷ quantity, at each level
- Price − marginal cost = what each extra unit adds to profit
Worked example
A workshop makes 100 units for 5,000 in total; making 150 would cost 6,500. It sells at 40.
- ΔTC = 1,500 and ΔQ = 50, so marginal cost = 30.00 per unit.
- Average cost falls from 5,000 ÷ 100 = 50.00 to 6,500 ÷ 150 = 43.33.
- Each extra unit adds 40 − 30 = 10.00, so the 50 units add 500.00 of profit.
At 1,000 → 1,200 units and 20,000 → 26,000 of cost, marginal cost is 6,000 ÷ 200 = 30; at a price of 25 each extra unit loses 5.
Common mistakes
- Using average cost to decide on extra output: fixed costs are already paid either way.
- Comparing two points far apart: if costs rise in steps (a second shift, a new machine), split the range.
- Leaving out costs that grow with output, such as materials, packaging or overtime.
Frequently asked questions
What is the marginal cost formula?
Marginal cost = change in total cost ÷ change in quantity. If making 150 units instead of 100 raises total cost from 5,000 to 6,500, marginal cost is 1,500 ÷ 50 = 30 per unit.
How is marginal cost different from average cost?
Average cost spreads all costs, fixed ones included, over every unit: 6,500 ÷ 150 = 43.33. Marginal cost counts only what the extra units add, so fixed costs drop out. When marginal cost is below average cost, the average falls as output grows.
When should a business produce more?
While the price, or more precisely the marginal revenue, of an extra unit is above its marginal cost. At a price of 40 and a marginal cost of 30, each extra unit adds 10 to profit.
Can I use it for one extra unit?
Yes: enter quantities that differ by one, such as 100 and 101, with their total costs. The result is the exact cost of the 101st unit.