Non-allocative costs for 248 Danish dairy farms are evaluated against the ‘best management practice’ using Farrell-type efficiency ratings. The average potential cost saving is estimated to 134, 800 kr., or 19% of the total non-allocative costs per dairy farm. The findings suggest that pure cost inefficiencies are far more important for dairy farms than inefficiencies due to sub-optimal farm size. Non-proportional reductions are shown to be as important as reductions due to scale economies. The paper closes with a discussion of the implications for farm policy and management practice.