The aim of the study was to analyse the impact of different levels in the revenue and cost components on economics in dairy sheep farm of Improved Valachian breed. Efficiency of the modelled production system varied from 78 to 89 % when value of cost components (feed, labour and fixed costs) was changed. Contrary, variability in the market prices of milk, cheese and lambs was of higher impact on the efficiency (74 to 103 %). The effectiveness of cost of 103 % was reached when higher value of milk commodities was applied. However, further development in the mentioned cost and revenue components is questionable. Increase in the input prices (more or less intense) is expected in all probability. On the other hand, the real possibility of farmers to positively affect the price of sheep commodities is limited in many cases. Therefore, increase in the feed and labour productivity along with high production parameters are the basic assumption for the efficient utilisation of all costs (feed, labour and fixed) and to improve efficiency from the farmers point of view,