Price transfering

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Price transfering

Post by Guest » 06.03.2007, 18:07

There is one major problem that many of the players exhibit in my opinion. They build raw resource buildings, produce water and power at 0.02 and 0.01 I'm guessing, and then they use these resources to produce more complex items, such as gold, diamonds and more. They then finish their production and look at the cost of what they have. It cost for diamonds, say only 30$ if I use my above example. They then look at the market, and see the true market value of a diamond:

power 0.06 and water 0.06 = 84$!!! The costs I relate to power and water are everywhere on the market, perhaps some people get power at 0.05, then the cost would be 74$. If we look at the price of diamonds on the market, 37??? That would suppose a market value of power and water around 0.017.

Clearly we can see here that people are forgetting a major aspect of managing a business, that is transfer pricing.

In a real business, consider yourself as a manager of say, a well, just one well. You produce water. You paid a bonus related to profitability, and your business is just like your empire, to well, mine, farms, whatever you have. You're asked by the owner of the business to sell your water at 0.02, and it costs you 0.02, would you accept? Of course not, you'd say, my water will cost you 0.06!! This game doesn't do that, it shows true cost!

If you produce your own water and power for other things, you have to remember you're sacrificing selling this water and power at 0.06!! So why in your right mind would you cost that subsequent product without considering this? Many businesses do this, improper costing and it is apparent here too! The diamond example is one, I purchase pigs and cows sometimes at below cost too, and I've even seen steel at 80$!!!

So people, remember that each of your production facilities is it's own profit center, it has to give you money!

The next topic is, ok, im using proper pricing transfer, but now I can't sell diamonds!! what do I do? sell something else!! stones, iron ore, anything else that when you consider your cost of sacrifice will give you a net benefit. Even better, buy from others who don't price transfer correctly, you're basically taking the value of their water and power!! Too bad for them! IF you're stuck in a market where you don't have another alternative, well then you'll have to grind yourself out of it, no other way around it.

I hope you found this interesting, (Albeit long :P)

Phoenixz28

Guest

Post by Guest » 07.03.2007, 12:19

Code: Select all

Green		 Red

1,089,533   1,360,630     Production in 24 hours

* 0.01      * 0.03        Production Cost

10,895      40,818        Cost



0.04		       0.06		      0.08

43581  54425	  65371  81637	 87162 108850	Total Sales Value
32686  13607	  54476  40819	 76268  68032	Profit

19079		      13657		     8236		     Difference


7,646,017	9,494,505	  Production in 24 hours

* 0.01		* 0.03		  Production Cost

76,460		284,835		 Cost



0.04		       0.06		      0.08

305840  379780	458761 569670	611681 759560	Total Sales Value
229380   94945	382301 284835	535221 474725	Profit

134435		      97466		     60496	    	Difference
The first example is for 10 employees
The second example is for 100 employees

Whilst I've only provided 2 examples, I hope you can see the trend that as the price increases, or the power plant expands. If you can't times the first difference by 10, and compare to 2nd difference.

The extra power produced in the red area means you should build power plants in Red.

So where I see the problem, is the advice to build in the green area compared to the Red area, This is what has dropped the power price so low. But in reality before building it you need to decide if you want to be a power producer, or a product producer.

In the above example prices don't move that much but if you are a producer, think of how many extra products you can build with the extra power, and you'd also have to expand less.

Now this also comes down to the advice to build up to your limit of buildings, rather than expand buildings. Who is going to buy these extra buildings from you in the future, or are you going to expand them all? and everything that entails.

Don't say but it's cheaper to build/expand in green than red,

yes this is very true in terms of cash cost, but it's the exact same cost of materials, and this is where the true expense comes in.

The simplist way I can try to put this, is I think too many people are looking at things short term and not long term.

This is just my view, and an attempt at trying to explain the true difference between red and green areas. because whenever i've seen advise it's generally the short term view that is most expressed.

Guest

Post by Guest » 07.03.2007, 16:19

yes i know it is better to build in red area but to start off it better to build in green for now i will be selling my greens and building almost everything in red later on :)

Guest

Post by Guest » 07.03.2007, 17:52

I understand the approach your taking, and it will work for a certain period, and then people will be lumbered with buildings they can't sell.

I consider the tactic of building in green first, building correctly later, a High Risk, Very Aggresive (towards market prices) tactic. Unless there is a demolish building option somewhere i've missed.

I understand people will take this option and will do very well out of it at this stage of the game, but it has it's pitfalls as well.

The point I'm trying to make, is the readiness in which people are told to build in green because everything works out cheaper. When really this is down to, how a person wants to/can play their company.

I even saw somewhere someone say to build a well and a mine in green and then later in yellow, the bonus those two buildings get in yellow is so immense that building anywhere apart from yellow is, just plain daft.

I think people need to fully understand expansion costs, the true cost. Stone, Wood and Steel. And also there will become a point when the buildings market becomes saturated with buildings that were incorrectly built in green, and the question is who is going to buy them.

If you consider this into the bargain as well.

Code: Select all

Object: PowerPlant / Size: 100m

Guest

Post by Guest » 07.03.2007, 17:58

yes i know who is going to buy them i know who npc i it dont mater if i loose 1mill as then i get to Manager then i dont care about money then just to have fun with all the new things ;) and keep building up i not plan on being the top player in this game :) even tho the players at the top now are all battleing just to be the top but that is them not everyone thinks the same or most dont think the same as me :)

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