Marginal Concepts

Marginal Concepts is an examination of the associated costs and potential benefits of specific business activities or financial decisions. It supports decision-making based on marginal or incremental changes to resources instead of one based on totals or averages. Marginal costs are variable costs consisting of labor and material costs, plus an estimated portion of fixed costs, such as administration overheads and selling expenses. It is critically important in resource allocation because, for optimum results, management must concentrate its resources where the excess of marginal revenue over the marginal cost is maximum.