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Report On Cost Of Production - Understanding Its Effectiveness

   

Added on  2020-02-05

6 Pages1399 Words60 Views
COST OF PRODUCTION
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Table of ContentsINTRODUCTION...........................................................................................................................1ARTICLE.........................................................................................................................................1CONCLUSION................................................................................................................................3REFERENCES................................................................................................................................3
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INTRODUCTIONThe report as presented below, focuses mainly on the economical term 'Cost ofProduction' including the importance for understanding its effectiveness being positive ornegative in an food industry producing chocolates specifically. The process begins withacquiring required raw materials and finishing on its distribution. Every company being a part ofspecific industry works for achieving maximum profits as there common goal. For making thispossible it is very much necessary that the company uses least cost raw materials from availableresources and also further using least cost method of production and distribution. Cost ofproduction is the term used to manage all such aspects of production and its distribution. Itdepends completely on the entrepreneur that how well he manages the available resources andfurther maximizing the profit. There is high level of competition prevailing in the food industry.It is therefore necessary that the industry clearly understands the importance of managing thecost of production. The cost of production should always be less including all direct costs such asraw material acquirement and indirect cost including transportation expenditure incurred to bringthe raw materials to the location of the plant of company.ARTICLEIn common parlance, it can be said that a company produces maximum output with giveninput. Every company works by converting the available resources and raw materials to producethe output. The company produces targeted units of output for given units of inputs. Ineconomics, the cost of production includes all those factors that are required to produce givenunit of output. Cost of production theory states that a company must produce in a way so that itcan attain maximum achievable profit as against its rivals by smartly using the inputs andtechnology to produce the same. Here the report is presented by targeting the food industryproducing chocolates specifically.The cost of production is the sum total of all factors required for production such as rawmaterials, land, labour and management. The companies that are a part of such an industry needsto analyse and study deeply the market condition, rivals strategy of producing similar products.With the advancement in almost every field including technology it has become very muchnecessary to acquire the required inputs at least cost and produce quality products. By doing so,the company could not only attain maximum profits margins but also withstand strongly amongstits rivals. Cost of production theory also includes the normal profit that an entrepreneur needs to1
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