Average Cost vs Marginal Cost | Top 6 Best Differences(with Infographics)

The key difference between Average Cost vs Marginal Cost is that Average Cost refers to the per-unit production cost of the goods produced in the company during the period whereas Marginal cost refers to the value of increase or decrease of total production cost of the company during the period under consideration if there is change in output by one extra unit.

Average Cost vs Marginal Cost Differences

Average Cost vs. Marginal Cost – The average cost is the sum of the total cost of goods or services divided by the total number of goods or services. And Marginal Cost increases is the cost of producing one more unit or additional unit of product or service. The average cost and marginal cost both are a vital concept in the management of accounting, which is used widely in decision making and calculating revenue in a different scenario.

What is Average Cost?

The average cost is the sum of the total cost of goods divided by the total number of goods. The average cost is also known as Unit cost. The below formula can calculate the average cost.

Average Cost = Total Cost / Number of units produced

It is directly proportional to the total cost of goods and inversely proportional to the number of goods, so when the number of goods increases average cost decreases. It has two components Variable cost and Fixed cost. The average cost aims to access the impact on total unit cost with the change in output level.

What is Marginal Cost?

Marginal Cost increases in the cost of producing one more unit or additional unit of product or service. Marginal cost changes in the total cost of production upon the change in output that changes in the quantity of production. Variable cost important factor in determining the output.

In short, marginal cost is the change in total cost that arises when the quantity produced changes by one unit. Mathematically, the marginal cost function is expressed as a derivative of the total cost with respect to quantity. It may change with volume, and so at each level of production, the marginal cost is the cost of the next unit produced. Marginal cost is equal to the change in total cost divided by change in quantity and can be expressed as below:-

Marginal Cost = Change in Total Cost / Change in Quantity

Where,

• Change in Total Cost is the difference in the total cost of production, including additional unit and total cost of production of the normal unit.
• Change in Total Cost = Total Cost of Production including additional unit – Total Cost of Production of normal unit
• Change in Quantity is the difference of total quantity product, including additional unit and total quantity product of normal unit.
• Change in Quantity = Total quantity product including additional unit – Total quantity product of normal unit

It can be said as the extra expense of producing one additional unit. It helps management to make the best decision for the company and utilize its resources in a better and profitable way as with quantity profit increase if the price is higher than the marginal cost.

Average Cost vs. Marginal Cost Infographics

Here we provide you with the top 6 difference between Average Cost vs. Marginal Cost.

Average Cost vs. Marginal Cost – Key Differences

The critical differences between Average Cost vs. Marginal Cost are as follows –

• The average cost is the sum of the total cost of goods divided by the total number of goods whereas Marginal Cost increases in the cost of producing one more unit or additional unit of product or service. Marginal cost changes in the total cost of production upon the change in output that changes in the quantity of production.
• The average cost aims to assess the impact on total unit cost with the change in output level. In contrast, the objective of marginal cost is to find whether it is beneficial to produce an additional unit of goods.
• The formula for Average cost = Total cost / Number of goods whereas formula Marginal cost = Change in total cost / Change in quantity.
• Krivka priemerných nákladov na začiatku klesá v dôsledku poklesu fixných nákladov, ale potom rastie v dôsledku zvyšovania priemerných variabilných nákladov. Zatiaľ čo krivka marginálnych nákladov je konkávna so zvyšujúcou sa návratnosťou, potom sa pohybuje lineárne a hladko s konštantnou návratnosťou a nakoniec sa mení v konvexných, keď hraničné náklady ukazujú zvýšenú návratnosť.
• Najlepším kritériom na určenie úrovne výroby na základe priemerných nákladov je minimalizácia nákladov a medzných nákladov maximalizácia zisku.
• Priemerná cena má dve zložky, priemernú fixnú cenu a priemernú variabilnú cenu, a marginálna cena je jedna jednotka a neobsahuje žiadnu zložku.

Priemerné náklady oproti marginálnym nákladom rozdiel medzi hlavami

Poďme sa teraz pozrieť na rozdiel medzi priemernými nákladmi a marginálnymi nákladmi.

Záver

Priemerné náklady vs. hraničné náklady sa používajú na lepšie rozhodovanie pomocou efektívneho využívania zdrojov a na identifikáciu a precvičovanie optimálnych úrovní výroby. Priemerná cena je súčet celkových nákladov na tovar vydelený celkovým počtom tovaru. O marginálnych nákladoch sa dá povedať, že ide o dodatočné náklady na výrobu jednej ďalšej jednotky. Pomáha manažmentu urobiť najlepšie rozhodnutie pre spoločnosť a lepšie a ziskovejšie využívať jej zdroje, ako pri zvyšovaní množstevného zisku, ak je cena vyššia ako hraničné náklady.