Question

Write Short note on Incremental Costs.

Answer 1

Incremental costs refer to the additional expenses incurred when a business undertakes a new activity, produces extra units, or introduces a new project. These costs are directly related to the decision being considered and include only those that change as a result of the decision. For example, if producing 100 more units of a product requires extra materials and labour, those added costs are incremental. This concept is useful in decision-making, especially in cost-benefit analysis and evaluating the profitability of new ventures.