Marginal costs are an indicator of marginal analysis in the production activities of the enterprise, certain additional costs spent on the production of each unit of additional products. Moreover, for each level of production there is a special, distinctive value of these costs.
Instructions
Step 1
The increase in variable costs, which is associated with the release of each additional unit of production, that is, the ratio of the increase in costs to the increase in production caused by them expresses the size of the variable costs. Therefore, it can be determined using the following formula: Variable costs = Increase in variable costs / Increase in production.
Step 2
For example, if the increase in sales amounted to 1000 units of goods, and the company's costs increased by 8000 rubles, then the marginal costs will be: 8000/1000 = 8 rubles - this means that each additional unit of goods costs the company an additional 8 rubles.
Step 3
In turn, with an increase in the volume of production, as well as sales, the costs of the company can change: with a slowdown, with an acceleration or evenly.
Step 4
If the organization's costs of purchased materials and raw materials decrease as the volume of production increases, then marginal costs decrease with a slowdown.
Step 5
The marginal cost rises as the volume of production increases with acceleration. This situation can be explained by the action of the law of diminishing returns or the rise in the cost of raw materials, materials or other factors for which the costs are classified as variables.
Step 6
In the case of a uniform change in marginal costs, they are constant and equal to the variable costs spent per unit of goods.
Step 7
Mathematically, marginal costs act as particular derivatives of the cost function for a given type of activity.
Step 8
A low marginal product means that a fairly large amount of additional resources are needed to produce more output. This, in turn, leads to high marginal costs. Or vice versa.
Step 9
Fixed production costs cannot influence the level of marginal costs for the reporting period, they are determined only by variable costs.
