Determinants of Cost
The determinants of cost varies so much from firm to firm and from problem to problem that no general set is applicable to all. Nevertheless, there are a few determinants which are important enough in modern manufacturing enterprises so as to deserve special mention. They are:
(1) Rate of output (i.e., utilization of fixed plant)
(2) Size of plant
(3) Prices of input factors (materials and labour)
(4) Technology
(5) Size of lot
(6) Stability of output
(7) Efficiency (of management as well as labour)
The word “cost” that we are using has different meanings in different settings. The kind of cost concepts to be used in a particular situation depends upon the business decision to be made. Hence an understanding of the meaning of various concepts is essential for clear business thinking.
The determinants of cost varies so much from firm to firm and from problem to problem that no general set is applicable to all. Nevertheless, there are a few determinants which are important enough in modern manufacturing enterprises so as to deserve special mention. They are:
(1) Rate of output (i.e., utilization of fixed plant)
(2) Size of plant
(3) Prices of input factors (materials and labour)
(4) Technology
(5) Size of lot
(6) Stability of output
(7) Efficiency (of management as well as labour)
The word “cost” that we are using has different meanings in different settings. The kind of cost concepts to be used in a particular situation depends upon the business decision to be made. Hence an understanding of the meaning of various concepts is essential for clear business thinking.
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