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In the initial stages of production (when the main aim of the firm is to capture a part of the market )do we continue to produce even if sales just cover the fixed costs (costs that are incurred any way if production is to go on ).
Production cost analysis is the study to calculate the cost of producing a produt/service.
Product cost is maily classefied into direct cost and in-direct cost. Direct poroduct/service cost = direct material cost + cost of direct manpower + direct production cost (e.g resources & depreciation). Indirect product/service cost = the share the unit prodict/service carries from the indirect business cost (e.g. sdministrationm sales & marketing costs). Indirect costs are distributed on the produced units using different criteria generally defined for each industry.
Another classification of production costs is fixed and variable costs. Fixed costs are the costs incurred by the business irrespective of the amount of production. variable costs are the costs related to changes in the amount of production. This calssification is used to decide whether to change the amount of production or not and by how much.
Know whether you continue to produce even if sales just cover the fixed costs or not, that depends on your future forecast, fainancial capcity, & and the stage in the product lifecycle. I suggest that you continue if you can and if you expect to regain profitability in the future and to stop if you can't or if see that you don't expect to regain profitabily in the future.
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