Incremental Cost

Incremental Cost – An incremental cost is often referred to as marginal cost.  It is the difference created in total cost of production reflected on a company’s balance sheet when the amount of output is increased by one unit.  Additional costs needed to add on another unit of production are also included in incremental cost.  For example, if a bottling factory wants to add more bottles to its assembly line and they need to acquire another building in the process, the incremental cost for the additional bottles includes the new building.  Other common elements found within incremental cost include equipment and labor.