![]() ![]() If an organization is looking for a return on investment, in that case, the price of the product must be equal to the average cost to recover the fixed cost and variable cost. With the help of Marginal cost, an organization can take a decision to increase profit at the production level. With the help of Average cost, an organization can take the decision to reduce cost at a production level MC = Change TC Divided by change in the Total number of units manufactured. ![]() Fixed cost remains constant up to a certain level of production.ĪC = TC (FC+VC) Divided by the Total number of units manufactured. Marginal cost considered all costs it cannot separate between Variable cost and Fixed cost. The average cost is separated between Fixed cost and Variable cost. Marginal cost is calculated to check if it is beneficial to manufacture an extra unit of goods/services or not. The average cost is calculated to evaluate the effect on total unit cost due to the change in the output unit. It is the extra cost incurred for the manufacture of one extra unit of goods or services. It is per unit cost of goods or services manufactured. Let’s look at the top 6 Comparison between Average Cost vs Marginal Cost If an objective is to increase profit during the production level then the marginal cost technique is useful and when an objective is to reduce cost during production level, in that case, the Average cost technique is used.Īverage Cost vs Marginal Cost Comparison Table.Both average costs vs marginal cost is measured under the same units and obtain the result from Total cost.The average cost method also called a weighted average method and Marginal cost method is also called as variable costing.Average cost calculates the effect on the total unit due to change in output level whereas marginal cost is calculated to find out if producing one extra unit of product is profitable or not.In Average cost, both Fixed and Variable cost is product cost whereas in margin cost Fixed cost is considered as period costs and Variable cost is product cost. Marginal cost considered all cost which fluctuates during the level of production and fixed cost remain constant up to a certain level of production, whereas Average cost considered Fixed cost and Variable cost.The average cost is nothing but the total cost divided by the number of units manufactured which shows the result as per unit cost of the product, whereas Marginal cost is extra cost generated while producing one or some extra units of products and it is calculated by dividing the change in total cost with Chang in the total manufactured unit.Let us discuss some of the major differences between Average Cost vs Marginal Cost: Key Differences between Average Cost vs Marginal Cost: ![]()
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