Profit is maximised where marginal cost equals marginal revenue. In the short run marginal cost usually falls, then rises as capacity is stretched (diminishing returns).
How to use the Marginal Cost Calculator
- Initial total cost
- Initial quantity
- New total cost
- New quantity
- Selling price per unit
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the total cost and quantity before and after the change, and the selling price.
Tips
- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.
Common mistakes to avoid
- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.
Inputs explained
| Field | What to enter |
|---|---|
| Initial total cost | Amount in your currency |
| Initial quantity | A number |
| New total cost | Amount in your currency |
| New quantity | A number |
| Selling price per unit | Amount in your currency |
What each result means
- Marginal cost = ([New total cost] – [Initial total cost])÷([New quantity] – [Initial quantity])
- Change in total cost = [New total cost] – [Initial total cost]
- Change in quantity = [New quantity] – [Initial quantity]
Example values
How the main result changes when Initial total cost changes and everything else stays at the example values above:
| Initial total cost | Marginal cost |
|---|---|
| 25,000 | 155 |
| 37,500 | 92.5 |
| 50,000 | 30 |
| 62,500 | -32.5 |
| 75,000 | -95 |
| 100,000 | -220 |
Formula
Marginal cost = (new total cost − old total cost) ÷ (new quantity − old quantity)Worked example
Inputs — Initial total cost: $50,000; Initial quantity: 1,000; New total cost: $56,000; New quantity: 1,200; Selling price per unit: $35.
Results — Marginal cost = $30.00; Change in total cost = $6,000.00; Change in quantity = 200; Decision = Price exceeds marginal cost – extra units add profit.
Frequently asked questions
What is marginal cost?
The extra cost of producing one more unit.
Where is profit maximised?
Where marginal cost equals marginal revenue.
Why does marginal cost rise eventually?
Diminishing returns as capacity fills up.
What formula does the Marginal Cost Calculator use?
Marginal cost = (new total cost − old total cost) ÷ (new quantity − old quantity).