Incremental Cost
Accounting glossary · Understand, connect, apply
Incremental cost is the additional total cost caused by a change in activity or a chosen action. It can include extra fixed costs as well as variable costs.
Example
Producing an extra batch requires 900 of materials, 400 of labour and a 200 one-off setup charge. The incremental cost is 1,500 under these assumptions.
Remember the difference
Do not equate incremental cost with variable cost per unit. A decision can trigger new capacity, setup or support costs, and may also sacrifice benefits elsewhere.
Browse the accounting glossary → · Follow a learning path
Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
← Return to the accounting glossary