Cost of Production


The report as presented below, focuses mainly on the economical term 'Cost of Production' including the importance for understanding its effectiveness being positive or negative in an food industry producing chocolates specifically. The process begins with acquiring required raw materials and finishing on its distribution. Every company being a part of specific industry works for achieving maximum profits as there common goal. For making this possible it is very much necessary that the company uses least cost raw materials from available resources and also further using least cost method of production and distribution. Cost of production is the term used to manage all such aspects of production and its distribution. It depends completely on the entrepreneur that how well he manages the available resources and further 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 the cost of production. The cost of production should always be less including all direct costs such as raw material acquirement and indirect cost including transportation expenditure incurred to bring the raw materials to the location of the plant of company.

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In common parlance, it can be said that a company produces maximum output with given input. Every company works by converting the available resources and raw materials to produce the output. The company produces targeted units of output for given units of inputs. In economics, the cost of production includes all those factors that are required to produce given unit of output. Cost of production theory states that a company must produce in a way so that it can attain maximum achievable profit as against its rivals by smartly using the inputs and technology to produce the same. Here the report is presented by targeting the food industry producing chocolates specifically.

The cost of production is the sum total of all factors required for production such as raw materials, land, labour and management. The companies that are a part of such an industry needs to 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 much necessary 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 amongst its rivals. Cost of production theory also includes the normal profit that an entrepreneur needs to earn and maintain to acquire the required input. Producing at possible least cost is the strategy followed strictly by every company in this rapid industrialization era.
Each and every part of expenses incurred for the production of any consumable item in an industry is surely one of the factor of production, contributing directly or indirectly in the production procedures. For e.g., In Australia there is wide market base of companies producing chocolates as mentioned in the report of academic research undertaken in Australia. Many of the big industrial units producing chocolates are located therein as the required inputs for producing the same are obtained easily. The chocolates produced in Australian industries have been admired by majority of costumer segment and the credit goes to the combined efforts of all different companies producing the same. These companies have been continuously making efforts for researching on the requirement of customers and making use of most appropriate techniques for producing the same. It has been a trend in the industry to make possible best use of available technology for producing the product smartly. The cost of production theory is the most important section for any industry to understand how the companies are working for acquiring necessary ingredients ensuring the health factor as an important concern for all the companies.

The production cycle of the industry begins with acquiring essentials using available normal profits. Without sufficient normal profit the company would not be able to acquire the required. Thus for ensuring sufficient amount of normal profit for ensuring future financial position of the company it is necessary to find out for every company that from where it would acquire cheapest inputs. As in here, Cocoa being the most important ingredient for producing chocolate the country is blessed with sufficient cultivation of cocoa available easily. The required modern technologies for making use of least labour efforts and making use of latest technological machinery is also a boon for food industry producing chocolates and many other varied food items producing companies.

The companies belonging to the food industry are always prepared to make use of best suitable substitutes in case if required inputs are not available easily. The market for inputs is also wide wherein required inputs for different companies are available according to there production structure. These food industrial companies are having big plants requiring heavy expenditure on the maintenance of the same as well as the land on which the companies carry there production and manufacturing.

Thus various sources of information including The Australian , also has stated that considering the present economic condition of the area, it can be forecasted that there will be a wide scope for even further more increase in demand of the products of the Australian food industry. The quality standards are achieved highly as the quality of the inputs is equally of high value. According to the Australian Financial Review , there has been an increase in the demand for instantly pre parable food items. The Australian food industry is one of the fastest and leading industry supported by required factors of production. It can be further added that the entrepreneur's personal skills applied for the production are also one amongst the factor of production.


It can be concluded hereby that according to various economists, Australian Financial Reviews and various academics researches carried out for the expansion of food industry, the companies have an in-depth knowledge on factors of production affecting both directly or indirectly on the production process. Each of the company that are a part of this industry having been working in such a way so that the factors can be used at maximum. Cost of production is the main term affecting the overall existence in this today's competitive era. It has become a strategy to produce goods that are cost effective both for the company or industry as well as the customer.


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