The topic of our presentation is Cost of production. So, we have come to know that how the firm is working systematically with all its process and methods .The firm has different units to the production of dairy products, which has its own automatic machines for its output. we discovered that the functioning of each product is very smoothly which is easier for the production incharges to put the tags ,logos ,prices and detailing on the packaging. The manager of the dairy firm had practically explained and showed the graphical data from 2015-20 about the revenue ,profits ,losses ,expenses and investment, expenditure . the manager had also said that how these were ranging and how the firm got their product familiar and popular to their consumer. As their product were reaching at the maximum level, their TRP got high through the consumer’s taste and preference. 

1. COST OF PRODUCTION
PRESENTED BY - ANUJ A TIGGA(28), KAKOLI BHAKAT(29),
CHANDRIKA KUMARI(55), ROSHAN DASH(63), REETIKA RATH(82)

2. INDEX
 Acknowledgement
 Introduction
 Cost
 Abstract (Firm Illustration)
 Cost Of Production
 Product Details
 Graph & Explanation
 Revenue
 Profit
 Conclusion
 Bibliography

3. ACKNOWLEDGEMENT
We would like to express our special
thanks of gratitude to our professor Dr.
Bibhunandini das who gave us the golden
opportunity to do this wonderful project of
Managerial Economics on “COST OF
PRODUCTION”, Who also helped us in
completing us project. We came to know
about so many new things we are really
thankful to her.

4. The topic of our presentation is Cost of production. So,
we have come to know that how the firm is working
systematically with all its process and methods .The firm
has different units to the production of dairy products,
which has its own automatic machines for its output. we
discovered that the functioning of each product is very
smoothly which is easier for the production incharges to
put the tags ,logos ,prices and detailing on the packaging.
The manager of the dairy firm had practically explained
and showed the graphical data from 2015-20 about the
revenue ,profits ,losses ,expenses and investment,
expenditure . the manager had also said that how these
were ranging and how the firm got their product
familiar and popular to their consumer. As their product
were reaching at the maximum level, their TRP got high
through the consumer’s taste and preference.
INTRODUCTION

5. COST
1.What is the definition of cost production? explain briefly and thoroughly?
The cost of production is mainly defined that the price of an object or condition is
determined by the sum of the cost of the resources that went into making it.
The cost can be briefly comprises as:
• Labour
• Capital
• Land
• Taxation
The two main type of cost of production.
The two main types of cost of production are mentioned below & they are:
Explicit cost: It is the opportunity cost of purchasing input from the market, is known
as an explicit cost.
Implicit cost: it is the opportunity cost of using self owned inputs Examples of
the cost are mentioned below Wages paid to the workers & payment of
electricity bills (explicit cost)

6. Estimated rent on entrepreneur's own building & estimated interest on
entrepreneur's own capital.
The sub main types of cost of production are to be briefly explained
Fixed cost
Fixed cost are the cost related to the use of fixed factors of production
.Principal component of fixed costs are to the point mentioned below & they
are:
• Expenditure on machine & plan
• Expenditure on land & building
• License fee
• Wages & salaries of permanent staff

7. ILLUSTRATIVE CONCEPT OF FIXED COST
Briefly indicates that fixed costs remains constant at all levels of output. when output is zero unit,
fixed cost is 10 rupee. when it increase to 2 to 4 or 6 unit, even then total fixed cost is rupee 10.
Diagrammatically of Total Fixed Cost
10 10 10 10 10 10
0
5
10
15
1 2 3 4 5 6
TFC
TFC
Unit of Output Total fixed cost
0 10
1 10
2 10
3 10
4 10
5 10
6 10
Output (Units)
Total
Fixed
Cost

8. VARIABLE COST
Variable cost refer to
the expenditure
incurred by the
procedure on the use of
variable factor of
Production. Principal component of variable cost are clearly
mentioned below & these are:
• Cost of raw material
• Wages of casual worker
• Expenses on electricity
• Wear & tear expenses

9. ILLUSTRATIVE CONCEPT OF VARIABLE COST
State by showing that as the output increases, total variable cost also increases.
when output is zero, total variable cost is also zero
Unit of output Total Variable
Cost
0 0
1 10
2 18
3 24
4 26
5 32
6 38
Diagrammatically of Total Variable Cost
0
10
20
25
30
38
40
0
10
20
30
40
50
1 2 3 4 5 6 7
TVC
Output (unit)
Total
Variable
Cost

10. Average cost
Average cost is the cost per
unit of output produced. It is
also called unit cost of
production.
Derivation of average cost
𝐴𝐶=
𝑇𝐶
𝑄
The total cost of producing 6
unit of a commodity is ₹ 48.
= ₹
48
6
=₹8
Fixed and variable
component of average cost
Average cost is the sum total
of average fixed cost and
average variable cost
AC=AFC+AVC
Average fixed cost is the
fixed cost per unit of output.
Formula as: 𝐴𝐹𝐶=
𝑇𝐹𝐶
𝑄

11. ILLUSTRATIVE CONCEPT OF AFC
This table briefly states that when 1 unit is produced, the average fixed cost is ₹10
when ₹5 units are produced the average fixed cost is ₹2. average fixed cost goes on
diminishing as output increase.
Output
(units)
Total Fixed
Cost (₹)
Average
Fixed Cost
(10)
1 10 10
2 10 5
3 10 3.3
4 10 2.5
5 10 2
6 10 1.67
7 10 1.43
8 10 1.25
 Diagrammatically of Average Fixed Cost
0
2
4
6
8
10
12
1 2 3 4 5 6 7 8
AVERAGE FIXED COST
Average Fixed Cost
Average
Fixed
Cost
(₹)

12. AVERAGE VARIABLE COST
average variable cost is the variable cost per unit of output. Formula as : AVC =
𝑇𝑉𝐶
𝑄
ILLUSTRATIVE CONCEPT OF AVC
Output
(units)
Total
Variable
Cost
Average
Variable
Cost
1 10 10
2 18 9
3 24 8
4 28 7
5 32 6.4
6 38 6.3
7 46 6.6
8 62 7.7
Average variable Cost
0
2
4
6
8
10
12
1 2 3 4 5 6 7 8
AVC
AVC
Output (units)
Average
Variable
Cost

13. MARGINAL COST
marginal cost is the additions to total cost due to the addition to total cost due to the addition of one
unit of output. Formula as: MCn =TCn-TCn-1 Or MC=
𝑇𝐶
𝑄
Illustrative concept of marginal cost
Output
(units)
Total
fixed
cost
Total
variable
cost
Total
cost
Margin
al cost
0 10 0 10 -
1 10 10 20 10
2 10 18 28 8
3 10 24 34 6
4 10 28 38 4
5 10 32 42 4
6 10 38 48 6
7 10 46 56 8
8 10 62 72 16
DIAGRAMMATICALLY OF MARGINAL COST
10
8
6
4
5
7
9
11
0
5
10
15
1 2 3 4 5 6 7 8
MC
MC
Output (units)
Marginal
Cost

14. ABSTRACT
The present study was conducted at a cooperative milk plant
having the capacity of 1.1 lakh Litre/day (LPD). The
investigation was carried out to study the cost and return of
manufacturing different dairy products and to analyse the
breakeven point. During the study it was found that total
production of Ghee, Dahi, skimmed milk powder, double
tonned milk, full cream milk in the study period were
600109kg, 614790 cups,1688150, 1328259 litre and
168253.50 litre respectively. The cost of manufacturing was
found to be ₹ 333.30 per kg for ghee, ₹ 10.35 per unit for dahi,
₹ 221.21 per unit for ₹ 223.70 per kg for skimmed milk
powder, ₹ 29.39 for double tonned milk, ₹ 36.48 per litre for
standardized milk and, ₹ 43.12 per litre for full cream. Break-
Even level of Standardized Milk, DTM, SMP, Dahi, FCM, Salted
Lassi, Ghee and Paneer were found to be 2.11 crore litre, 1.05
crore litre, 1.57 crore kg, 48.91 lakh cups, 16.81 lakh litre,
54.136 lakh kg, and 1.25 lakh kg, respectively.

15. S.n
o
Component S.No Component
1 Raw material 9 House keeping
2 Electricity 10 Depreciation on building
3 Water 11 Depreciation on equipment
and machinery
4 Steam 12 Expenditure on manpower
5 Refrigeration 13 Quality control
6 Repair and maintenance 14 Interest on plant equipment
and machinery
7 Store and stationary 15 Milk and milk solid losses
8 Packing material 16 Miscellaneous expenses

16. TR = TC …….. (1)
P × Q = TFC + (AVC × Q) ……... (2)
P × Q – (AVC × Q) = TFC …….... (3)
(P – AVC) × Q = TFC …….... (4)
Q = TFC ….…... (5)
FORMULA ESTIMATION
Where, TR = Total revenue,
TC = Total cost,
P = Price of the product
Q = Break- even output
TFC = Total fixed cost and
AVC = Average variable cost
Estimation Procedure
Total cost was estimated by considering fixed cost and
variable cost involved in manufacturing of various
products which is represented by: Total cost = Total Fixed
Cost + Total Variable Cost Fixed costs Fixed costs are those
costs which do not vary with the level of production.
Following costs were categorized under fixed costs of the
plant.

17. DTM
Double toned milk Total production of
DTM in the study period was 1328259
litre. Cost of manufacturing DTM was
found to be ₹ 29.39 per litre. Share of
fixed cost and variable cost in total cost
was 7.21% and 92.79%, respectively.
Supervision and administration, steam
and refrigeration shares 6.71%, 1.16%
and 1.39% of the total cost. The share of
raw material, packaging and processing
was found to be 85.67% , 2.29% and
12.04% , respectively. Major cost
component of DTM is shown below
Component wise cost of DTM
COMPONENT OF COST UNIT COST
(₹/LITRE)
COST %
Raw material 25.17 85.67
Labour 0.14 0.49
Electricity 0.10 0.35
Water 0.02 0.05
Steam 0.34 1.16
Refrigeration 0.41 1.39
Sundries 0.35 1.19
Quality Control 0.06 0.20
Packaging Material 0.67 2.29
Supervision &
Administration
1.97 6.71
Depreciation & Interest 0.15 0.50
Total Cost 29.39 100.00

18. STANDARDIZED MILK
Total production of
standardized milk in the study
period was 2328443 litre. cost
of manufacturing standardized
milk was found to be ₹ 36.48
per litre. share of fixed cost and
variable cost in total cost was
4.19% and 95.81%,
respectively. supervision and
administration, and
refrigeration shares 3.76%,
1.10 % of the total cost. the
share of raw material,
packaging and processing was
found to be 91.91% , 1.85%
and 6.24% respectively.

19. FULL CREAM MILK
Total production of full cream
milk in the study period was
168253.50 litre. reveals that cost
of manufacturing full cream was
found to be ₹ 43.12 per litre.
share of fixed cost and variable
cost in total cost was 5.58% and
94.42% , respectively. supervision
and administration, and labour
shares 4.58%,
1.22 % of the total cost. the share
of raw material, packaging and
processing was found to be
90.00%, 2.00% and 8.00%
respectively
Component of cost Unit cost (litre) Cost %
Raw material 38.72 89.80
Labour 0.53 1.22
Electricity 0.02 0.04
Water 0.02 0.04
Steam 0.33 0.77
Refrigeration 0.40 0.93
Sundries 0.01 0.03
Quality control 0.02 0.05
Packaging material 0.67 1.56
Supervision &
administration
1.97 4.58
Depreciation &
interest
0.43 1.00
TOTAL COST 43.12 100.00

20. PANEER
The total quantity of paneer
produced during the study period
was 100882 kg. reveals that the cost
of production of paneer turned out
to be ₹ 205.09 per kg. The
contribution of total fixed cost and
total variable cost to the total cost
were 2.07% and 97.93%,
respectively. in the total cost,
processing cost was 5.00% ,
packaging cost was 1.00% and raw
material contributed 94.00% . in
total cost, the labour cost
contributed 1.39% , supervision and
administration contributed 1.28%.
the shares of steam, depreciation on
equipments and buildings and
interest on loans, electricity and
sundries were also significant.
Component of cost Unit cost (litre) Cost %
Raw material 192.64 93.93
Labour 2.85 1.39
Electricity 0.58 0.28
Water 0.02 0.01
Steam 0.43 0.21
Refrigeration 0.22 0.11
Sundries 0.14 0.07
Quality control 3.15 1.54
Packaging material 0.81 0.40
Supervision &
administration
2.63 1.28
Depreciation & interest 1.62 0.79
TOTAL COST 205.09 100.00

21. GHEE
total production of ghee in
the study period was 600109
kg. reveals that cost of
manufacturing ghee was
found to be ₹ 333.30 per kg.
share of fixed cost and
variable cost in total cost was
1.30% and 98.70%,
respectively. sundries and
supervision and
administration contributed
1.29% and 1.17% ,
respectively. the share of raw
material, packaging and
processing was found to be
96.00%, 1.00% and 3.00%
respectively
Components of cost Unit cost (litre) Cost %
Raw material 320.00 96.01
Labour 2.00 0.60
Electricity 0.64 0.19
Water 0.03 0.01
Steam 0.85 0.25
Refrigeration 0.89 0.27
Sundries 0.24 0.07
Quality control 4.31 1.29
Packaging material 3.91 1.17
Supervision &
administration
0.43 0.13
Depreciation & interest 333.30 100.00
TOTAL COST 320.00 96.01

22. Dahi
Total production of Dahi in
the study period was
614790 cups. Cost of
manufacturing Dahi was
found to be ₹ 10.35/unit.
Share of fixed cost and
variable cost in total cost
was 9.00% and 91.00%
respectively. Labour and
supervision and
administration contributed
6.03% and 5.28%. The share
of raw material, packaging
and processing was found to
be 57.69% , 21.77% and
20.54% respectively.
Component of cost Unit cost (litre) Cost %
Raw material 5.97 57.69
Labour 0.62 6.03
Electricity 0.19 1.84
Water 0.00 0.05
Steam 0.05 0.51
Refrigeration 0.04 0.40
Sundries 0.27 2.58
Quality control 0.01 0.09
Packaging material 2.25 21.77
Supervision and
administration
0.55 5.28
Depreciation and
interest
0.39 3.78
TOTAL COST 10.35 100.00

23. SKIMMED MILK POWDER
Total production of skimmed
milk powder in the study period
was 1688150 kg. Cost of
manufacturing SMP was found to
be ₹ 223.70 per kg. Share of fixed
cost and variable cost in total cost
was 1.71% and 98.29%,
respectively. Electricity and
supervision and administration
shares 1.02% and 1.31% of the
total cost. The share of raw
material, packaging and
processing was found to be
95.23%, 0.70% and 4.00%,
respectively shows the
component wise cost of
manufacturing skimmed milk
powder.
Component of cost Unit cost (litre) Cost %
Raw material 213.03 95.23
Labour 0.28 0.13
Electricity 2.27 1.02
Water 0.00 0.00
Steam 1.27 0.57
Refrigeration 0.31 0.14
Quality control 0.07 0.03
Sundries 1.07 0.48
Packaging material 1.57 0.70
Supervision and administration 2.92 1.31
Depreciation and interest 0.90 0.40
TOTAL COST 223.70 100.00

24. REVENUE GENERATED
BY DIFFERENT DIARY
PRODUCTS IN THE
PLANT
Product Total sales Price at dock Revenue Percent
share
Paneer 100600.00 235.00 23641.00 6.12
Ghee 442180.00 369.00 163164.42 42.22
Dahi 593082.60 63.80 37838.67 9.79
SMP 2625.00 240.00 630.00 0.16
Standardize
d Milk
2328442.50 38.00 88480.82 22.90
Double
toned milk
1328258.50 34.00 45160.79 11.69
Full cream
milk
168253.50 46.00 7739.66 2.00
7%
45%
10%
0%
25%
13%
PANEER
GHEE
DAHI
SMP
STANDARDIZED MILK
DTM

25. PROFITABILITY
GENERATED BY
DIFFERENT DIARY
PRODUCTS IN THE
PLANT
Product Price
received by
the plant
Cost of
manufacturi
ng
Profit
margin
Profit
percent
Paneer 235.00 205.09 29.91 14.58
Ghee 369.00 333.03 35.70 10.71
Dahi 12.76 10.35 2.41 23.29
SMP 240.00 223.70 16.30 7.29
Standardized
milk
38.00 36.48 1.52 4.17
Double toned
milk
34.00 29.38 4.62 15.72
Full milk
cream
46.00 43.12 2.88 6.68
PANEER
19%
GHEE
14%
DAHI
31%
SMP
10%
STANDAR
DIZE MILK
5%
DTM
21%
PROFIT
PANEER GHEE
DAHI SMP
STANDARDIZE MILK DTM
FMC

26. CONCLUSION
In conclusion , it should be emphasized that in this study and attempt
was made to explain that the short run fluctuation in the number of
workers employed and the number of hours paid for per workers , and
the number of hours worked per workers are related to each other in the
short run equilibrium , but that no attempt was made to develop a model
which was capable of predicting these variables . in order to use model
of short run demand for workers developed in this study for prediction
purposes . for example , it would be necessary to know the expected
future changes in output in advance , and at lest for those industries in
which expectations appeared to be quite accurate (and not based merely
on past output behavior ) , this would required knowledge of the
industry which an economic for caster ( as opposed to an individual
manager in the industry ) does not have at his disposal . Also , in this
study an afford was made to use as disaggregate and homogeneous body
of data as possible to lessen the problem of aggregating vastly dissimilar
firms, but to forecast aggregate employment form the three digit
industry level would be a tremendous task .

27. BIBLIOGRAPHY
Introductory
microeconom
ics by-v k
ohri(book)
Social
media
Magazine
Articles
Newspaper
Dairy
firm
(Guru $
son’s)

28. THANKYOU