NEB Model Question Solution Grade 12. Marginal Cost Function.

In Mathematics for economics chapter of grade 12 math. the marginal cost is the change in total production cost that comes from making or producing one additional unit. To calculate marginal cost, divide the change in production costs by the change in quantity. The purpose of analyzing marginal cost is to determine at what point an organization can achieve economies of scale to optimize production and overall operations. If the marginal cost of producing one additional unit is lower than the per-unit price, the producer has the potential to gain a profit.

KEY TAKEAWAYS

Marginal cost is an important concept in managerial accounting, as it can help an organization optimize its production through economies of scale.

A company can maximize its profits by producing to where marginal cost (MC) equals marginal revenue (MR).

Fixed costs are constant regardless of production levels, so higher production leads to a lower fixed cost per unit as the total is allocated over more units.

Variable costs change based on production levels, so producing more units will add more variable costs.

Companies must be mindful of when increasing production necessitates results in step costs due to changes in relevant ranges (i.e. additional machinery or storage space needed).