Incremental Cost

AAA

DEFINITION of 'Incremental Cost'

The encompassing change that a company experiences within its balance sheet due to one additional unit of production.


Also referred to as "marginal cost".

INVESTOPEDIA EXPLAINS 'Incremental Cost'

Incremental cost is the overall change that a company experiences by producing one additional unit of good.

RELATED TERMS
  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Long Run Incremental Cost - LRIC

    Forward-looking incremental costs that can be accounted for by ...
  3. Unit Cost

    The cost incurred by a company to produce, store and sell one ...
  4. Efficiency Principle

    An economic theory that states that the greatest benefit to society ...
  5. Convention Statement

    A document filed by an insurance or reinsurance company that ...
  6. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative ...
RELATED FAQS
  1. How is liquidity risk captured by the cash conversion cycle (CCC)?

    Liquidity risk is captured by the cash conversion cycle (CCC) through the use of days inventory outstanding, days sales outstanding ... Read Full Answer >>
  2. What are the differences between absorption costing and variable costing?

    Absorption costing includes all costs, including fixed costs, in figuring the cost of production, while variable costing ... Read Full Answer >>
  3. Can a business ever be too small to issue commercial paper?

    There are effective – though not legal – restrictions on the size of commercial paper issuers. Any company can issue commercial ... Read Full Answer >>
  4. What does inventory turnover tell an investor about a company?

    The inventory turnover ratio determines the number of times a company's inventory is sold and replaced over a certain period. ... Read Full Answer >>
  5. What is a deferred tax liability?

    A deferred tax liability is an account that is listed on a company's balance sheet and occurs when its taxable income is ... Read Full Answer >>
  6. What are the pros and cons of using the fixed charge coverage ratio?

    One main advantage of using the fixed-charge coverage ratio is it provides a good, fundamental assessment for lenders or ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  2. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  3. Investing Basics

    Explaining Write-Downs

    A write-down is a reduction in the book value of an asset because it is overvalued compared to the market value.
  4. Investing

    Apple or Google: Which is the Better Bet?

    Apple and Google have made many investors rich since the turn of the century. Which is more appealing going forward?
  5. Economics

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  6. Economics

    What are Noncurrent Assets?

    Noncurrent assets are property that a company owns that will last for more than one year.
  7. Fundamental Analysis

    How Microsoft & Apple's Balance Sheets Compare

    Looking at two iconic companies, Microsoft and Apple, whose balance is sheet is stronger and where?
  8. Economics

    Explaining Activity-Based Costing

    Activity-based costing (ABC) is a managerial accounting method that assigns certain indirect costs to the products incurring the bulk of those costs.
  9. Economics

    What is a Contra Account?

    A contra account is an offset that reduces the value of a related account.
  10. Economics

    What is an Impaired Asset?

    An impaired asset is one where the fair market value of the asset is less than the historical cost (or book value) of the asset.

You May Also Like

Hot Definitions
  1. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  2. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  3. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  6. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
Trading Center