Abstract:

The presence of economies of scale allows industries and companies to have better profits. In the present study, the translog cost function of a manufacturing company in Mexico is estimated during the period January 2013 to September 2016. The elasticity of production with respect to cost is found to be 1, where increases in production lead to increases in the same proportion in costs. From this result, we analyze some aspects in which the company could improve this situation, for example, to change its accounting to the costing method ABC.