marginal cost

The cost of the next unit.

Marginal Cost is the additional cost incurred to produce one more unit; it is essential for pricing, make-or-buy decisions, and analyzing how costs change with activity levels.

- Used in product/service costing, budgeting, and variance analysis.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.

- Example: The costing team uses **marginal cost** to allocate costs and analyze margins by product line.

- Why it matters: Improves cost accuracy, supports better pricing and budgeting, and strengthens performance measurement.