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In general, there are three categories of agricultural production cost estimation. The first one is the "Descriptive Analysis Method" based on farm accounting data, which mainly involves combining point estimates of average costs in to various classes for comparison (For eg: variable costs or fixed costs expenditure, returns etc using a book-keeping system).
The second method is "Statistical Analysis Approach" based on an on-farm survey using a questionnaire and the estimation involves use of descriptive statistics, production function estimation and econometric regression techniques . Both cross-sectional and time-series data can be used. (For e.g: marginal costs of all agricultural inputs like fertiliser, labour, land, capital etc.).
The last one is called "Economic-Engineering Approach" where the measured data from machinery operations or other use of engineering operatios of farm equipment are converted in cost per unit using relevant enegineering formulas. After computing the individual cost of operation of equipment, fuel , electricity or irrigation water. The total cost may be computed using production function estimates. The cost of agriculture on enevironment which values the externalities may require greenhouse gas emission or global warming potential of individual agrochemicals or fertiliser or pesticides which is added up to the total cost. The above also largely involves engineering formulas for calculation of costs. (For e.g.: Life cycle analysis of fertilisers and agrochemicals, transportation costs, tractor, harvester use, irrigation pump use etc.).
