# Incremental profit

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This article has multiple issues. Please help improve it or discuss these issues on the talk page. (Learn how and when to remove these messages) This article may be in need of reorganization to comply with Wikipedia's layout guidelines. Please help by editing the article to make improvements to the overall structure. (October 2014) (Learn how and when to remove this message) This article needs more citations. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Incremental profit" – news · newspapers · books · scholar · JSTOR (March 2017) (Learn how and when to remove this message) (Learn how and when to remove this message)

**Incremental profit** is the [profit](/source/Profit_(accounting)) gain or loss associated with a given [managerial](/source/Management) decision.[1] Total profit increases so long as incremental profit is positive. When incremental profit is negative, total profit declines. Similarly, incremental profit is positive (and total profit increases) if the incremental [revenue](/source/Revenue) associated with a decision exceeds the incremental cost. The incremental concept is so intuitively obvious that it is easy to overlook both its significance in managerial decision making and the potential for difficulty in correctly applying it.[2] For this reason, the incremental concept is sometimes violated in practice. For example, a firm may refuse to sublet excess [warehouse](/source/Warehouse) space for $5000 per month because it figures its cost as $7500 per month -a price paid for a long-term lease on the facility. However, if the warehouse space represents excess capacity with no current value to the company, its historical cost of $7500 per month is irrelevant and should be disregarded. The firm would forego $5000 in profits by turning down the offer to sublet the excess warehouse space. Similarly, any firm that adds a standard allocated charge for fixed costs and overhead to the true incremental cost of production runs the risk of turning down profitable business.

## References

1. **[^](#cite_ref-1)** ["incremental analysis"](https://web.archive.org/web/20161218184329/http://www.unf.edu/~dtanner/dtch/dt_ch11.htm). Archived from [the original](http://www.unf.edu/~dtanner/dtch/dt_ch11.htm) on 2016-12-18. Retrieved 2017-03-01.

1. **[^](#cite_ref-2)** Sacher, Seth B.; Simpson, John D. (2020). ["Estimating Incremental Margins for Diversion Analysis"](https://www.jstor.org/stable/27006878). *Antitrust Law Journal*. **83** (2): 527–556. [ISSN](/source/ISSN_(identifier)) [0003-6056](https://search.worldcat.org/issn/0003-6056).

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