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Supply, production and costs
In elementary theory of supply, a supplier is the organization, usually the producer, which makes decisions on the amount of goods to be supplied. The goal of supplier is to maximize profits (Case and Fair 113). Thus, the main question of supply theory is to determine the quantity of supplied goods during a given period of time so that profit would be maximal. The optimal supply value is influenced by many factors, such as: price of the commodity, price of related goods and production costs. The costs, in their turn, depend on prices on production factors and on secondary factors: state of technology, producers’ income, future expectations etc.
The basic model of supply, production and costs is built suggesting that all factors are constant beside the price of the commodity. Since the aim of a supplier is to maximize profits, the supply curve is the upward curve. The optimal level of supply can determined basing on marginal costs. Marginal cost is the cost of producing an extra unit of output. For a price-taking producer, optimal level of output takes place when marginal cost is equal to price (Lipsey and Harbury 54). Changes of other factors influencing optimal supply result in shift of supply curve, while the changes of price result in movement of optimal production value along the supply curve (Lipsey and Harbury 56).
Nowadays, management of companies acting as suppliers takes this theory as the basis for determining optimal volume of production and maximizing profits, although the models for each company have to include factors other than price, which are industry-specific. However, any managerial approach includes understanding of marginal cost and its influence on maximal profit.
Applying the supply theory within an organization should serve as a basis for determining optimal production volume. However, prices of related goods and secondary factors should necessarily be analyzed and included into the model in order to provide efficient result for strategic planning.

 
References
Case, Karl E. and Ray C. Fair. Principles of economics. Prentice Hall, 2008.
Lipsey, Richard J. and Colin Harbury. First principles of economics. Oxford University Press, 1992.