How to Find Marginal Cost
Find or make a chart that shows your production costs and quantities., Take out a pen, paper and calculator., Place another column labeled "Total Cost" to the right of your columns for "Fixed Cost" and Variable Costs.", Add together your fixed costs...
Step-by-Step Guide
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Step 1: Find or make a chart that shows your production costs and quantities.
Make sure to include the following in your chart:
Quantities.
You will want to devote the first column in your chart to the total number of units produced.
Your quantities can increase by 1, such as 1,2,3,4 etc. or they can increase by larger increments, such as 1,000, 2,000, 3,000 etc.
Fixed costs and variable costs.
During production there are certain costs, such as rent, that are fixed.
Other costs, such as the cost of materials are variable according to the quantity.
Make columns for each of the costs next to the quantities and input the figures. -
Step 2: Take out a pen
You can also choose to do the work on a spreadsheet; however, you can understand the marginal cost calculation better if you write out the formula initially. , ,, If you are using a spreadsheet program, you can insert a formula in the total cost column that will add together the fixed and variable costs on each row to calculate total cost. , , Your first line in the column will remain blank, because you cannot figure out a marginal cost based on no units of production. , $40 minus $30. , For example, 2 minus
1. , For example, Marginal Cost=$10/1.
In this case, the marginal cost is $10. , Continue to subtract figures from the row above to figure out marginal cost for the remaining units of production. -
Step 3: paper and calculator.
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Step 4: Place another column labeled "Total Cost" to the right of your columns for "Fixed Cost" and Variable Costs."
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Step 5: Add together your fixed costs and variable costs for each number of units.
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Step 6: Enter the total cost calculation in the column
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Step 7: until all the costs for each unit increment are calculated.
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Step 8: Write out the formula "Marginal Cost=Change in Total Cost/Change in Total Quantity."
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Step 9: Make a column to the right of total cost that says "Marginal Cost."
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Step 10: Find change in total cost by subtracting the total cost in row 3 from total cost in row 2.
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Step 11: Find the change in total quantity by subtracting the total quantity in row 3 from the total quantity in row 2.
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Step 12: Plug your numbers into the formula.
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Step 13: Write your marginal cost in the column on the second row.
Detailed Guide
Make sure to include the following in your chart:
Quantities.
You will want to devote the first column in your chart to the total number of units produced.
Your quantities can increase by 1, such as 1,2,3,4 etc. or they can increase by larger increments, such as 1,000, 2,000, 3,000 etc.
Fixed costs and variable costs.
During production there are certain costs, such as rent, that are fixed.
Other costs, such as the cost of materials are variable according to the quantity.
Make columns for each of the costs next to the quantities and input the figures.
You can also choose to do the work on a spreadsheet; however, you can understand the marginal cost calculation better if you write out the formula initially. , ,, If you are using a spreadsheet program, you can insert a formula in the total cost column that will add together the fixed and variable costs on each row to calculate total cost. , , Your first line in the column will remain blank, because you cannot figure out a marginal cost based on no units of production. , $40 minus $30. , For example, 2 minus
1. , For example, Marginal Cost=$10/1.
In this case, the marginal cost is $10. , Continue to subtract figures from the row above to figure out marginal cost for the remaining units of production.
About the Author
Kathryn Fisher
Dedicated to helping readers learn new skills in home improvement and beyond.
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