The objective of this study was to understand the causal structure between the milk production cost items and to find out informations to improve the dairy farm management system for the reduction of production cost by the analysis of survey of dairy farms done at Livestock Experiment Station in Korea for I year from May 1987 to April 1988. The results obtained are as follows ; 1. Costs of labor and concentrate were the most important factors for the reduction of milk production cost. 2. Implement and building had little effect on the reduction of labor and roughage cost. 3. Under present dairy farm management system. the raising scale had much effect on the reduction of production cost, while roughage area had little.