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Questions
Explain the following with an example:
Marginal cost.
Explain the following:
Marginal cost.
Answer in Brief
Solution
- The marginal cost is the cost of producing one additional unit of a product.
- The concept of marginal cost is very useful in making managerial decisions about price fixation, make-or-buy decisions, etc.
- Example: A company produces 100 bicycles at a total cost of ₹ 10,000.
- Producing one additional bicycle brings the total cost to ₹ 10,050.
- The marginal cost is ₹ 50 (₹ 10,050 − ₹ 10,000).
- This means that producing the 101st bicycle will cost an additional ₹ 50.
- It helps firms determine the cost-effectiveness of increasing output.
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Notes
Students can refer to the provided solutions based on their preferred marks.
Controllable and Uncontrollable Costs
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Chapter 8: Fundamental Concepts of Cost - EXERCISES [Page 139]
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