Marginal Cost Calculator: Cost of Each Extra Unit, With a Cost Schedule
Find marginal cost (ΔTC ÷ ΔQ) from two production levels or a full cost schedule, with average total cost, the lowest-cost output and profit at your price.
How it works
Marginal cost (MC) = change in total cost ÷ change in quantity = (TC₂ − TC₁) ÷ (Q₂ − Q₁) · Average total cost (ATC) = TC ÷ Q · Average variable cost = (TC − fixed cost) ÷ Q · Profit = price × Q − TC
Marginal cost is the extra cost of producing one more unit. Over a range of output it is the change in total cost divided by the change in quantity. Fixed costs such as rent do not change with output, so marginal cost comes only from variable costs: materials, hourly labor, energy, packaging. Choose Two output levels for the usual textbook or business case, Changes only if you already know ΔTC and ΔQ, or Cost schedule to paste a whole table of output and total cost. The schedule gives marginal cost for every step, average total and variable cost, and the output where average cost is lowest, with a chart showing the classic pattern: average cost falls while marginal cost is below it and rises once marginal cost is above it. Under More options, enter your selling price to see whether the extra units add profit (price above marginal cost) and which listed output earns the most. This differs from the cost per unit calculator, which divides total cost by units to give an average; marginal cost looks only at the extra units. Results assume both totals are measured in the same period and prices.
Worked example
A workshop makes 1,000 units for a total cost of $25,000. Producing 1,200 units costs $28,600. The change in total cost is $3,600 and the change in output is 200 units, so marginal cost = $3,600 ÷ 200 = $18.00 per unit. Average total cost falls from $25.00 to $23.83 because each extra unit costs less than the average. At a selling price of $22, the 200 extra units add (22 − 18) × 200 = $800 of profit.
Sources: Omni Calculator: Marginal cost (chair example) · Corporate Finance Institute: Marginal cost formula (tire example) · OpenStax Principles of Economics 3e, 9.2: total cost and marginal cost table
Frequently asked questions
What is the formula for marginal cost?
Marginal cost = change in total cost ÷ change in quantity. If total cost rises from $5,000 to $5,500 when output rises from 10,000 to 12,000 units, marginal cost = $500 ÷ 2,000 = $0.25 per unit.
What is the difference between marginal cost and average cost?
Average cost spreads all costs, including fixed costs, over every unit: total cost ÷ output. Marginal cost is the cost of the extra units only. When marginal cost is below average cost, producing more pulls the average down; when it is above, the average rises. The two are equal at the lowest point of the average cost curve.
Do fixed costs affect marginal cost?
No. Fixed costs are the same at any output, so they cancel out when you subtract one total cost from another. Marginal cost only reflects costs that change with output, such as materials, piece-rate labor and energy. A step in fixed cost (a second machine or shift) shows up as a jump in marginal cost at that output.
Why does marginal cost usually rise at high output?
Because of diminishing returns: once a factory, kitchen or team is near capacity, each extra unit needs overtime, more waste or slower work, so it costs more than the one before. At low output marginal cost often falls first as fixed equipment is used more fully.
How do I use marginal cost to set output?
Keep producing while the price (or marginal revenue) you get for an extra unit is above its marginal cost. Profit is highest where marginal revenue equals marginal cost. Enter your price under More options to see the profit change, or use the cost schedule to find the most profitable listed output.
Related calculators
For planning and study. Real cost decisions should use your accounting records and consider capacity limits.