The document discusses cost functions and the relationship between cost and output. It identifies key determinants of cost such as the rate of output, size of plant, input prices, technology, stability of output, and efficiency. It also outlines the short-run and long-run cost functions and examines the short-run and long-run relationships between cost and output through graphs. Finally, it describes three approaches to measuring the cost-output relationship: the accounting, engineering, and statistical approaches.

1. Cost Function
Dr. NGPASC
COIMBATORE | INDIA
Dr. N.G.P. ARTS AND SCIENCE COLLEGE
(An Autonomous Institution, Affiliated to Bharathiar University, Coimbatore)
Approved by Government of Tamil Nadu and Accredited by NAAC with 'A' Grade (2nd Cycle)
Dr. N.G.P.- Kalapatti Road, Coimbatore-641048, Tamil Nadu, India
Web: www.drngpasc.ac.in | Email: info@drngpasc.ac.in | Phone: +91-422-2369100
RAJAKRISHNAN M
Assistant Professor in Commerce CA

2. Dr. NGPASC
COIMBATORE | INDIA
Cost Determinants
Rate of output (Utilization of fixed plant)
Size of plant
Prices of input factors (Materials and labour)
Technology
Stability of output
Efficiency (of management and labour)

3. Dr. NGPASC
COIMBATORE | INDIA
Cost and Output Relationship
The Short-run
cost function
The Long-run
cost function

4. Dr. NGPASC
COIMBATORE | INDIA
Short-Run Cost-Output Relationship

5. Dr. NGPASC
COIMBATORE | INDIA
Long-Run Cost-Output Relationship

6. Dr. NGPASC
COIMBATORE | INDIA
Measurement of Cost-Output Relationship
Accounting Approach:
TC into FC, VC, SVC – basis – inspection, experience and Judgement
Engineering Approach:
Depends upon Knowledge of physical relationship supplemented by pooled judgements of practical
operations
Statistical Approach:
Uses multiple correlation analysis to find the functional relation between changes in costs and
determinants

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