Estimating Cost Analysis using Goal Programming

Objectives: The purpose of this paper is to develop an application of goal programming for a mathematical economics problem. In economic optimization given a cost target, the producer conditionally maximizes output or revenue. Methods/ Statistical Analysis: The paper aims in estimating cost limited maximal output based on full and stochastic frontiers of Cobb-Douglas and variable returns to scale production structure. The estimation procedure constitutes primarily formulating goal programming problems, later solving them by mathematical programming. The cost limited output expressions are derived. Findings: The method developed was applied to six manufacturing sectors of all India and the expression derived for cost limited outputs showed that the cost limited maximal output is cost efficient. Empirical analysis carried out resulted in showing the states whose cost efficiency was underachieved, overachieved and one and the same. Application/Improvements: The model has practical application in manufacturing sectors and was applied six sectors of all India. In future fuzziness can be applied to analyse cost efficiency in the manufacturing sectors of different states of all India.