Cost Analysis of Production

Cost Analysis: Cost Analysis is the cost involved in the purchasing of the inputs and how effectively we increase the production of the firm this is called Cost Analysis.

Total Cost: Sum Of All Costs, these includes

• Fixed Cost: Fixed Cost is the cost which will be fixed for the production of the products. even if the production increased or decreased the cost is Same. Ex: Rent, Salaries, Depreciation.
• Variable Cost: Variable cost is the cost which will be keep on changing by based on the production if the production increases the variable cost increases if the production decreases the variable cost decreases this will impact the Total Cost of the product. Ex: Raw Materials, Labour, Capital.

The cost of any product will be determined on the base of the fixed cost and variable cost only, by change in the variable cost of the production the total cost will increase.
This can be explained with the help of the table given below.

Output Q	Total Fixed Cost TFC	Total Variable Cost TVC	Total Cost TC
0	1500	0	1500
1	1500	1000	2500
2	1500	1200	2700
3	1500	1700	3200
4	1500	2000	3500
5	1500	2200	3700

In the above table you can see the cost of production of the product.

• As the output is increasing we can see the fixed cost remaining is same.
• As the output is increasing the variable cost is also increasing with the increasing output. 
• For every increasing in the output the variable cost is increasing and this will lead to increasing in the total cost of the product.