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What are included in variable costs?

Alex Kwan
Certified Public Accountant
Alex Kwan is a Certified Public Accountant (CPA) and the CEO of Flex Tax and Consulting Group in the San Francisco Bay Area. He has also served as a Vice President for one of the top five Private Equity Firms. With over a decade of experience practicing public accounting, he specializes in client-centered accounting and consulting, R&D tax services, and the small business sector.

Alex Kwan

Certified Public Accountant

Expert Answer

Variable costs are things like your raw materials, labor hours, and additional transportation costs.

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How do I calculate marginal cost from total variable cost and what condition will this be?

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This answer was written by one of our trained team of researchers who validated it for accuracy and comprehensiveness.

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Margin cost is calculated from total cost, which includes both fixed costs and variable costs. If you tried to calculate your marginal costs based solely on the change in variable costs, your results would be skewed and unreliable because they didn't include fixed costs.

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How do I calculate marginal cost when I want to maximize profit?

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Your calculation remains the same. To find the marginal cost, you would divide the total change in cost by the total change in quantity. Do this for several intervals, and then compare them. The interval with the lowest marginal cost is the production level at which you would maximize profit. In a graph depiction, the lowest marginal cost would be the trough, or lowest point, of your cost curve.

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How do I calculate total variable cost if one of it is not given?

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This answer was written by one of our trained team of researchers who validated it for accuracy and comprehensiveness.

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In a business scenario, it is unlikely that this amount would be given to you. Instead, you would have to look at business expenses and determine which expenses are variable. These would be expenses such as utilities, payroll, and supplies that are going to change over time. You'll typically find these in the business records. Then you would total them up to find the total variable cost.

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What equation do I use to calculate marginal cost?

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In order to calculate marginal cost, you have to take the change in total cost divided by the change in total output. Take the first 2 rows of your chart. Subtract the total cost of the first row by the total cost of the second row.

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What would I use marginal cost for?

Community Answer

Marginal cost helps decide if it is really worth it economically to change a variable with output production. It is the cost of every time you change a variable that influences both the product and the total cost.

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What is the stock market?

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A marketplace where you can buy and sell parts of a company. The more stocks you own, the more money you gain/lose.

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How can I find the total cost when I have marginal cost and fixed cost?

Community Answer

The Marginal Cost function is just the derivative of the Total Cost function, therefore you have to find the Anti-Derivative of the Marginal Cost function. When you use anti-derivatives you always have the variable 'c' tagged on the end (purely because of how derivatives work), your Fixed Cost will fill in for your 'c' variable.

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