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Top 10 facts about the world. Marginal cost and total cost are related in terms of the cost of production for manufacturing companies or service providers. Fixed costs and marginal variation in cost are both considered when determining the total cost, so total costs encompass marginal costs. The average total cost will generally decrease to a minimum before increasing, forming a U-shape.
Marginal costing-definition Marginal costing distinguishes between fixed costs and variable costs as convention ally classified. The marginal cost of a product ââ is its variable costâ. This is normally taken to be; direct labour, direct material, direct expenses and the variable part of overheads.or example, if a manufacturing firm produces X unit at a cost of $ 300 and X+1 units at a cost of $ 320, the cost of an additional unit will be $ 20 which is marginal cost.