Marginal analysis
In one sentenceComparing the additional revenue with the additional cost of one small step, such as an extra hour of work or an extra production batch, to see whether it is worthwhile.
Simply put
The rule is simple: if what you will earn from the extra step is greater than what you will spend on it, it is worthwhile.
It helps with daily decisions: extending working hours, adding a shift, or producing another batch.
Worked example
A restaurant is considering staying open one hour after midnight, expecting additional sales of 2,500 SAR per day and additional costs (materials, wages and electricity) of 1,700 SAR.
Additional revenue2,500 SAR
Additional cost1,700 SAR
Additional profit per day2,500 − 1,700 = 800 SAR
Formula: Additional revenue − additional cost
Don't confuse it with
Marginal costMarginal cost is one side of the comparison, and marginal analysis compares it with the additional revenue.