Tutorial

This tool will help you analyze your cost structure and help you pick a good price for your product. You will need to collect some information to use the tool. First, calculate your fixed costs for your product. This is what you have to pay per day no matter what. Maint fees on harvesters are a good example of a fixed cost. Next, calculate your variable costs. A variable cost is a cost that is only met when you produce a new item. A good example of a variable cost is buying resource, such as copper, from the bazaar and using it to craft an item. Note that it is ok to have either a fixed or variable cost of 0. Next, you need to determine how many units of each product you can produce per day. If you are making CDEFs, how many can you produce per day? Enter those values into the first 3 fields of the form.

Entering those values will tell you the Break Even Price of your product. At that price, you make no profit and no loss for the given volume. The next thing you probably want to do is figure out what will happen if you raise or lower your prices. Enter a Price to Test and find out. You will see a Break Even Volume calculated for you. This is the number of units you have to sell at the new price to break even. You are also shown the difference between this value and your current production. A positive value means you need to produce more units to break even. A negative value means you can produce fewer units to break even.

If you are raising or lowering the price, demand for your product is likely to change. If you raise the price, you are likely to sell fewer items. If lower the price, you are likely to sell more items. You can enter an estimate of what you feel the new demand will be at the new price. When you do so, you will be told the estimated profit you will make at the estimated volume with your new price. You want this to be a positive value or you will lose money!

Finally, you might want to know how many units you need to sell for the new price given a profit goal. You might want to make a 2k profit per day. You can enter that value and the form will tell you how many units you have to produce and sell to meet your goal. You are also told the difference between this value and what you estimated the new demand to be.

Lets try some numbers and see what happens. Assume we have a fixed cost of 2000 per day. Next assume it costs 10 credits to produce an item. Finally, assume we can produce 500 items per day. We would enter 2000, 10 and 500 into the first three fields. Once you tab out of the Production box, you should see a value of 14 in the break even price. This tells us that we need to sell each unit for 14 credits. We must also sell all 500 units.

What happens if we raise the price to 15 per unit? Enter 15 in the Price To Test box and tab out. You will see that the break even volume is 400 units per day. Since we are producing 500 per day, the difference is -100. This means that we only have to sell 400 units to break even and the extra 100 units are pure profit.

But if you raise the price, won't the demand go down? Yes, more than likely it will. This means you probably won't be selling all 500 any longer unless you were underselling the market. You can guess what the new volume might be. Enter your guess into the Estimated Volume box and tab out. Lets say we think we will only sell 450 units now. After entering that value, we find that we will be making 250 credits per day.

That sure isn't very much. If we want to make 1k credits per day, we can figure out how many units we will need to sell at the new price. Enter 1000 in the Required Profits field and tab out. We see that we would have to sell 600 units total to meet this goal. We also see that we need to sell 150 more units than our estimate of 450.