Meaning of cost function?
Answers
Answer:
a function that depicts the general relationship between the COST of FACTOR INPUTS and the cost of OUTPUT in a firm. In order to determine the cost of producing a particular output it is necessary to know not only the required quantities of the various inputs but also their prices.
Explanation:
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Answer:
Management uses this model to run different production scenarios and help predict what the total cost would be to produce a product at different levels of output. The cost function equation is expressed as C(x)= FC + V(x), where C equals total production cost, FC is total fixed costs, V is variable cost and x is the number of units.
Understanding a firm’s cost function is helpful in the budgeting process because it helps management understand the cost behavior of a product. This is vital to anticipate costs that will be incurred in the next operating period at the planned activity level. Also, this allows management to evaluate how efficiently the production process was at the end of the operating period.
Explanation:
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