TYPES OF COST IN AGRICULTURAL PRODUCTION

TYPES OF COST IN AGRICULTURAL PRODUCTION

Costs of production are expenses incurred in the production process.




The types of costs in agricultural production include:

a. Fixed/ overhead costs: these are costs which do not change with level of production such as salaries for permanent workers, depreciation of machinery, and interest on borrowed
capital,

b. Variable/ prime costs: these are the costs which change with the level of production.

They increase as the level of production increases and decrease as the level of production decreases such as wages for casual labour, transport costs, cost of inputs, and electricity bills.




c. Explicit costs: these are costs which are easy to recognize and quantify such as insurance, salaries/ wages, cost of inputs, and depreciation of machinery.

d. Implicit costs: these are costs which are not easily recognized and are sometimes forgotten when calculating costs of production such as family labour, managerial services, and interest on own capital.

e. Marginal costs: these are costs incurred in producing additional unit of out put




f. Total costs: this is the sum of fixed and variable costs.

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