Part III (Chapters 5–7) is concerned with the analysis of production and cost relationships. A knowledge of these is fundamental to capacity planning in the long run, as well as scheduling and purchasing in the short run. Managers can then operate the firm efficiently, manipulating the use of inputs appropriately. Chapter 5 is concerned with the nature of production relationships between inputs and outputs, which in turn determine cost relationships with outputs. The latter are examined in detail in Chapter 6, with a particular emphasis on the use of cost–volume– profit analysis. Chapter 6 is concerned with the estimation of cost relationships, and again makes use of the statistical methods explained in Chapter 4, while describing the particular problems associated with measuring cost relationships. The results of empirical studies are also discussed.