Where can you make a Factory best?

[Guest]

I wanna build a factory i already have one in Red but that was a not so good choice where can i make best my Factoy?

[Guest]

u can make the best facotry in red u already have made the best choice

[Guest]

ok I tought it was wrong

[Guest]

depends, do you want higher production rate, or cheaper?

[Guest]

For the low quality steel I suggest green. But this is subject to debate with good arguments on both sides.

For the high quality steel (selling price above 145) and all the other factory products go red.

[Guest]

For the low quality steel I suggest green. But this is subject to debate with good arguments on both sides.

For the high quality steel (selling price above 145) and all the other factory products go red.

Do you mind telling me some of the advantages of having a green factory, as according to my calcuations any saving in the production cost is lost in the decrease of production, or are you factoring in the costs of expansion as well, Thank You.

[Guest]

Depends which product you are calculating on Puzzman, and where prices are at the time.

Here is a recent thread on the topic. I have a link there to a Google Docs spreadsheet that compares steel at green and red factories. There is also some varied discussion on the matter.

[Guest]

It is always the same debate ... what is the best choice in term of area : Cost or Production ?! Long term or short term strategy ?!

Resume : A merchant wants to develop a factory business. He wants to know what is the best opportunity for him to get profit back. So what happen after 30 days with his business ?

As we know there is 3 areas : Green, Yellow and Red one. First of all, Yellow has a disavantages compare to Green and Red area :

Green has the lowest cost compare to Yellow at the same production
Red has a additionnal bonus for producing in this area.

Yellow isn't interesting at all for investors.

This is the following price for raw materials :

[quote]Stone price 10

[Guest]

"Conclusion : At 130 caps for a long term strategy it is much better to focus your production in a green area. However, this isn't true when the final price is going up to 130 caps or when your purchasing cost is lower than the resume's price."

Can I also conclude out of your shemes that for a red area it's more profitable to keep it on an area of 20 m2? It's just a conclusing based on ur drawing, based on the ROI line...

[Guest]

Oh man, that is teh pretty!

Question: Why does your "Final Cost" column swing around so much? Shouldn't it always be 105.75 for red and 95.25 for green?

Also, I would expect that ROI was achieved using "Total Margin" divided by "Building Cost" but those numbers don't check. Mind sharing your formulas?

[Guest]

Why does your "Final Cost" column swing around so much?

The final cost included :

Goodwill + fix cost of steel (15 caps) + Variable cost (Coal+ Iron+ Power+ Chemical) = Cost of the production

Cost of the production / Quantity produced = Final cost

Variable cost : it depends of your purchasing price for each materials needed such as : Coal, Iron, Chemical and Power for steel.

Fix cost : 15 caps for the red area and 4,5 caps for the green area.

Goodwill : you can compare it as amortization, usally I take 30 days. (Construction of the construction + wages)

Quantity produced : The quantity produced is variable for each square meter extended.

Shouldn't it always be 105.75 for red and 95.25 for green?

Not at all, it is variable. Try the simulation with less or more variable cost (ex: steel) your final price moved too. I took the market price, which mean if you contract with a supply your final price is dropped, even if the selling price is dropped or increased. Those data and those graph hasn't the same sense.

If one of the data above changes, the final cost moved too.

Also, I would expect that ROI was achieved using "Total Margin" divided by "Building Cost" but those numbers don't check. Mind sharing your formulas?

I forgot to precise that the total margin unit is "/ day" ... The simulation was made on 30 days.

(Total margin * 30) / Building cost = ROI

I edit the resume, i forgot to precise it. That is true for buying a building today and selling it in 30 days if you follow those price.

Can I also conclude out of your shemes that for a red area it's more profitable to keep it on an area of 20 m2? It's just a conclusing based on ur drawing, based on the ROI line...

No, you should read it like that : The ROI is higher when the square meter is smaller in a green area.

For X caps invest today in a green area for 20m2, after 30 days you get 2,46 time your original funds.

For X caps invest for 20m2 in a red area today, if you sell it after 30 days you get 0,85 time you original funds.

After, this depends of your own data. Each of us have our personnal configuration, our personnal contract, our personnal deal. This is only exact for this resume. We can't generalize. However, your choice on an area should depend of :

- Your strategy
- Your competitors
- The price of the goods
- The bonus in the area
- Your purchasing contract

Ten small power plant at 20m2 are profitable in a green area, but doesn't mean that one power plant at 200m2 isn't more profitable than the green area.

[Guest]

wow, I just simply love reading all these.

[Guest]

The final cost included :

Goodwill + fix cost of steel (15 caps) + Variable cost (Coal+ Iron+ Power+ Chemical) = Cost of the production

Goodwill : you can compare it as amortization, usally I take 30 days. (Construction of the construction + wages)

Woah! Woah! Flag on the play!

You took out goodwill (secretly) and then later calculated ROI?? That's like the boss sneaking some money out of the till mid-day, then at the end making a big show about "look how little profit I made."

You can't pay the building for goodwill, then later say "this is the ROI for the building." The building was already accounted for. All those ROIs should be roughly 3.33 higher if you already took out a 30 day return.

Also that still doesn't add up. I'll look at the first 3 lines of the red factory:

First one: Varable cost: 90.75, fixed cost 15.
"Goodwill" = 210800 build cost /30 days/ 24 hours / 22.28 prod/hour = 13.14 "goodwill".
So the first line would be 90.75 + 15 + 13.14 = 118.89. And it is. Good.

Second line: Variable cost: 90.75, fixed cost 15.
"Goodwill" = 341800 build cost / 30 days / 24 hours / 33.25 prod/hour = 14.28 "goodwill".
So the second line should be 90.75 + 15 + 14.28 = 120.03. But it's not, where did the 111.22 come from?

Third line: Variable cost: 90.75, fixed cost 15.
"Goodwill" = 472800 build cost / 30 days / 24 hours / 44.12 prod/hour = 14.88 "goodwill".
These are going up (which makes sense as production scales down) but the "Final Cost" column is going down.

I forgot to precise that the total margin unit is "/ day" ... The simulation was made on 30 days.

(Total margin * 30) / Building cost = ROI

OK I see now, you're talking a monthly return on investment, and were saying 85% per month, not 0.85% per day (which I had expected.) I have no problem with that. Except as said above, that you already took out a 100% return. Your small building is returning 185% every month.

This is just a better way to list it because it's the same every month. Taking out the goodwill in a separate transaction is not only needlessly complex, but it also means you have a different # for your first 30 days then you do for later months.

The only other suggestion I would make is evening out your on the chart units (or at least clearly marking them):
Building cost is single.
Final cost is per item (with a hidden monthly amortization)
Production is per hour
Total Margin is per day
ROI is per month

That makes it tougher to follow even as you and your calculations know what it means.

Still a good bit of work and a very nice looking chart.

[Guest]

Woah! Woah! Flag on the play!

You took out goodwill (secretly) and then later calculated ROI?? That's like the boss sneaking some money out of the till mid-day, then at the end making a big show about "look how little profit I made."

You can't pay the building for goodwill, then later say "this is the ROI for the building." The building was already accounted for. All those ROIs should be roughly 3.33 higher if you already took out a 30 day return.

This is the difference between European and Anglo-saxon accountancy .

That Americans (not only) consider as goodwill (asset), is a charge for in Europe called "amortization". There isn't any secret. I prefer the IFRS norms than GAAP norms for valued my asset.

ROI = (Gain of the invest - Cost of the investment) / Cost of the investment

ROI = Revenue1 + Revenue2 + Revenue X / Cost of the Investment

I used the IFRS norms, I have to applicate it until the end and not making a mix of GAAP and a mix of IFRS. I decide to use the margin for being clear and making more sence because it "net". When you use the revenue, it isn't clean at all because there is "Cost of production included".

Also that still doesn't add up. I'll look at the first 3 lines of the red factory:

First one: Varable cost: 90.75, fixed cost 15.
"Goodwill" = 210800 build cost /30 days/ 24 hours / 22.28 prod/hour = 13.14 "goodwill".
So the first line would be 90.75 + 15 + 13.14 = 118.89. And it is. Good.

Second line: Variable cost: 90.75, fixed cost 15.
"Goodwill" = 341800 build cost / 30 days / 24 hours / 33.25 prod/hour = 14.28 "goodwill".
So the second line should be 90.75 + 15 + 14.28 = 120.03. But it's not, where did the 111.22 come from?

Third line: Variable cost: 90.75, fixed cost 15.
"Goodwill" = 472800 build cost / 30 days / 24 hours / 44.12 prod/hour = 14.88 "goodwill".
These are going up (which makes sense as production scales down) but the "Final Cost" column is going down.

That is form my personnal business plan spreadsheet. I invest in a factory every 30 days. I agree that your final price should change to this :

• m2 Final cost
  20 => 118,89
  30 =>120,03
  40 => 120,63
  50 => 121,03
  100 => 122,07
  150 => 122,68
  200 => 123,19

Also, with those price and that practice the ROI is lower after 30 days and there is no interest to invest in short term in a red area. The keystone of the red area is a long term investment.

OK I see now, you're talking a monthly return on investment, and were saying 85% per month, not 0.85% per day (which I had expected.) I have no problem with that. Except as said above, that you already took out a 100% return. Your small building is returning 185% every month.

This is just a better way to list it because it's the same every month. Taking out the goodwill in a separate transaction is not only needlessly complex, but it also means you have a different # for your first 30 days then you do for later months.

The only other suggestion I would make is evening out your on the chart units (or at least clearly marking them):
Building cost is single.
Final cost is per item (with a hidden monthly amortization)
Production is per hour
Total Margin is per day
ROI is per month

That makes it tougher to follow even as you and your calculations know what it means.

Still a good bit of work and a very nice looking chart.

I understand, but as I said above (in the same threat) I am using IFRS norms. I respect those norms and I can't mix both. I should used GAAP norms according to the game, also I don't like GAAP norms for several reasons and I adopted IFRS norms (also, I am European but not all of European countries have adopted those norms ...)

Also, there is some hidden boxes, for a better presentation. I have any server and the website that I use is under construction now.

there, it is the copy of the spreadsheet unhidden :

The only other suggestion I would make is evening out your on the chart units (or at least clearly marking them):
Building cost is single.
Final cost is per item (with a hidden monthly amortization)
Production is per hour
Total Margin is per day
ROI is per month

I confirm those data and its units.

Hope that help . Feel free to ask any question, I will answer you as soon as I can.

SPB's CEO

[Guest]

Gotcha. I've had GAAP beaten into me so much, I forget there are other standards. And I'm not likely to abandon my bias any time soon (as I said, it just seems simpler and more direct the other way). But I do appreciate where you are coming from. Thanks for cearling it up.