Accounting Dictionary

Marginal Cost

The difference in costs.

I run my plant 16 hours a day and spend $100,000 to make 100,000 pens. A customer wants to buy 10,000 additional pens. If I accept that order I will have to pay overtime to my plant operators. It will cost $124,000 to make 110,000 pens. The marginal cost is $24,000, the difference between $124,000 and $100,000.

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