Question

Identify & explain the concept from the given illustration.

Ajay’s papad and pickle producing unit incurred expenditure of ₹ 50,000/- on machinery, ₹ 1,00,000/- towards rent and ₹ 2,00,000/- on wages for the workers during 2018-19.

Answer 1

Concept: Cost of production

Explanation:

1. When an entrepreneur undertakes an act of production, he has to use various inputs and make payments for each of them. The expenditure incurred on various inputs is known as the cost of production.
2. Since given illustration is about the expenditure incurred by Ajay to run his papad and pickle producing unit, it is related to the concept of ‘cost of production’.