Marginal cost
In one sentenceThe increase in total cost resulting from producing one additional unit; it usually consists of variable costs only, because fixed costs do not change.
Simply put
The question it answers: how much will producing one more unit cost me? The rent is already paid, so it is not part of the answer.
It helps with decisions such as accepting an extra order at a special price: if the price is above marginal cost and you have spare capacity, the order increases profit.
Worked example
A factory's total cost is 60,000 SAR to produce 1,000 units and 64,000 SAR to produce 1,100 units.
Increase in cost = 64,000 − 60,0004,000 SAR
Increase in production = 1,100 − 1,000100 units
Marginal cost per unit = 4,000 ÷ 10040 SAR
Formula: Change in total cost ÷ Change in number of units
Don't confuse it with
Unit costAverage unit cost includes its share of fixed costs (60 SAR in the example), while marginal cost does not.