MARGINAL COST

 Marginal Cost:

 Marginal cost as understood in economics is the incremental cost of production which arises due to one-unit increase in the production quantity. As we understood, variable costs have direct relationship with volume of output and fixed costs remains constant irrespective of volume of production. Hence, marginal cost is measured by the total variable cost attributable to one unit. For example, the total cost of producing 10 units and 11 units of a product is `10,000 and `10,500 respectively. The marginal cost for 11th unit i.e. 1 unit extra from 10 units is `500.

Marginal cost can precisely be the sum of prime cost and variable overhead.