Incremental Cost (Noun)
Meaning
The increase or decrease in costs as a result of one more or one less unit of output.
Classification
Nouns denoting attributes of people and objects.
Examples
- The company's incremental cost of producing one more unit of the product was $5, which was lower than the average cost per unit.
- The incremental cost of hiring an additional employee was factored into the business's decision to expand its operations.
- A decrease in incremental cost can lead to an increase in profitability, as more units can be produced at a lower cost per unit.
- The manager needed to determine the incremental cost of increasing production by 10% in order to make an informed decision about pricing.
- When calculating the break-even point, it's essential to consider the incremental cost of producing one more unit and compare it to the revenue generated by its sale.