Total Cost of Production

The total cost of production is calculated by adding up all the costs incurred in the production process. This includes both fixed costs and variable costs. Fixed costs are costs that do not change with the level of production, such as rent and salaries, while variable costs are costs that vary with the level of production, such as raw materials and labor.

To calculate the total cost of production, we need to know the cost per unit and the number of units produced. In this case, we are given that the total cost of production of 10 units is Rs. 200 and the total cost of production of 20 units is Rs. 600.

Calculating Cost per Unit

To find the cost per unit, we can divide the total cost of production by the number of units produced. In this case, the cost per unit for 10 units is Rs. 200/10 = Rs. 20. Similarly, the cost per unit for 20 units is Rs. 600/20 = Rs. 30.

Marginal Cost

Marginal cost is the additional cost incurred in producing one additional unit. It is calculated by taking the difference in total cost when production is increased by one unit. In this case, we can find the marginal cost by subtracting the total cost of producing 10 units from the total cost of producing 11 units.

The total cost of producing 11 units can be calculated by multiplying the cost per unit (Rs. 30) by 11, which equals Rs. 330. The marginal cost is then Rs. 330 - Rs. 200 = Rs. 130.

Explanation

The marginal cost represents the cost of producing one additional unit. In this case, as production increases from 10 units to 11 units, the marginal cost is Rs. 130. This means that the cost of producing the 11th unit is Rs. 130.

The marginal cost is important for businesses as it helps in making decisions regarding production levels. By comparing the marginal cost with the price at which the product is sold, a business can determine whether it is profitable to produce and sell additional units. If the marginal cost is higher than the selling price, it may not be profitable to increase production. However, if the marginal cost is lower than the selling price, it indicates that producing additional units will result in increased profit.

In conclusion, the marginal cost of producing one additional unit is Rs. 130.