Welcome to this course on marginal profitability analysis! You'll learn how marginal profitability analysis can help you make many business decisions.

We start by defining marginal costs and marginal profit. Once you have those basics down, we can then look at how to calculate marginal profitability. Many of you may be familiar with traditional full-absorption product costing or activity-based costing. We'll compare them to marginal profitability to show the pros and cons of each method and when each is appropriate.

Finally, we'll get very practical with some examples of making decisions with marginal profitability analysis. We'll show you how marginal profitability can help you determine optimal production amounts and which products to promote.

We'll explain how to use it for setting pricing. We'll look at how to calculate the change in profitability from a price increase and a price decrease. Marginal profitability analysis is very useful for setting pricing but not the only tool you should use.

Note:This course is also available in Video-based format. https://www.illumeo.com/courses/marginal-profitability-analysis

Learning Objectives
  • Explore the definitions of marginal costs and marginal profitability.
  • Discover how to use a cost-volume-profit analysis and break-even analysis.
  • Identify the pros and cons of using marginal profitability analysis, activity-based costing, and traditional full absorption costing.
  • Explore the following keys factors to profitability: cannibalization, excess capacity, and step-fixed costs.
  • Recognize the best uses for marginal profitability analysis.
Last updated/reviewed: August 28, 2023
6 Reviews (30 ratings)


Anonymous Author
I am a controller for a company that manufactures good that we sell directly to our customers or through wholesale. We have a lot of conversations around opening new facilities and is a great review of these concepts to better understand the decision making process.

Anonymous Author
The content was well organized and easy to understand. I liked how the author included ways he had utilized marginal profitability analysis during his career in the banking industry.

Anonymous Author
Good overview - text course provides detailed course material that is easy to follow and thorough.

Member's Profile
Really enjoy this instructor's hard copy files. They have really helpful visuals and charts.

Anonymous Author
Helpful course with good examples. A bit wordy to work through, but still a good course.

Anonymous Author
Straight forward course on profitability that meets the stated learning objectives.

Course Complexity: Foundational

No advanced preparation or prerequisites are required for this course.

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
Course Syllabus
  Marginal Profitability Analysis (Text Based Course)PDF