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Lord Fitz
Project Amargosa
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Posted - 2009.03.29 10:01:00 -
[31]
The minimum something is worth is what you could get for it if you sold it right then and there, the maximum is what it would cost you to buy more right then and there.
It may become worth more later if you hold onto it, you may be able to buy it cheaper if you are patient or travel, or get more for it if you do the same, but those are all value add services, the profit you are making is not from the activity used to generate the item, but profit from trade.
You can ignore this all you like, but when you say you actually take it into account when selling things, then all you're doing is not writing it down and pretending it doesn't exist on paper, even though mentally you acknowledge it.
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Agor Dirdonen
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Posted - 2009.03.29 10:34:00 -
[32]
Edited by: Agor Dirdonen on 29/03/2009 10:34:34
Originally by: Beth Korai Edited by: Beth Korai on 29/03/2009 01:17:51
Originally by: brinelan You would rather take 10m worth of mined minerals, make something that sells for 5 m and be happy? Why not just sell the minerals for the 10m? ugh
Your example is a bit silly.
You: mine 10 million in minerals, and sell for 10 million, making 10 million profit Non-miner: buy 10 million in minerals, make something, sell for 15 million, making 5 million profit Me: mine 10 million in minerals, make something, sell it for 15 million, making 15 million in profit
You guys really need to stop equating value with cost; they're not the same thing. I would love for someone to explain how something that cost me zero isk suddenly cost me 10 million isk ifI use it to build something. Just because I CAN sell it for 10 million does NOT mean it has a 10 million isk cost on it suddenly.
Edit: and in answer to the original poster, I value the minerals much as others have: essentially an average between buy and sell wherever the manufactured/mined item will be sold.
It's not a silly example, it happens quite a lot. Lots of producers just produce something they like. When it's ready, they check the market to see that it sells for X isk and they just put it up for X-0.01 Isk. When it sells, they go "woohoo, made lots of cash", while they actually have NO CLUE whatsoever how much real profit they made.
They could have gained more money if they would have sold their minerals. Fact is, THEY DON'T KNOW cause they don't care to do the math. Why should they? The product is being sold for X amount of Isk and that must be a good price right? "That guy should have done his math so if I just undercut it, I must make a profit too".
It's like finding gold on the street worth 5k and then putting 1k cost into it to make it into a ring which you then sell for 4k.... woohoo!!!! I earned 4k... (and this indeed is a silly example, you don't find gold on the streets )
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Ashen Angel
Minmatar Ashen's Wings
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Posted - 2009.03.29 12:30:00 -
[33]
Originally by: Beth Korai
Originally by: Ashen Angel quote: In economics, the cost-of-production theory of value is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it. The cost can compose any of the factors of production (including labour, capital, or land) and taxation.
It does not matter how you acquired the resources, they are still a cost of production factor based on their value. You can steal minerals worth 10 mil isk, mine for an hour to get the ore and refine it, or buy it on the market. The value is still 10 mil. To produce something using those minerals means there was a mineral cost in production of 10 mil.
Apples and oranges. You can't compare economic theory with basic accounting principles and manufacturing/accounting basics. I'll ask again, and maybe someone will answer: explain to me where an asset (mined minerals with no cost associated with acquisition) suddenly has a cost when used to manufacture something. Value and cost are not equivalent.
Simple math:
Cost of production for module a: 1000 isk install fee 500 isk manufacturing fee 8000 isk market value in minerals
Total cost to produce: 9500 isk Current market value of module: 7000 isk
Cost of production for module a: 1000 isk install fee 500 isk manufacturing fee 8000 isk market value in minerals
Total cost to produce: 9500 isk Current market value of module: 10000 isk
Module B makes a profit, module A loses isk on the cost to produce. Yet some will say I mined the minerals so they cost 0 isk...
The cost can be paid with assets on stock which have a value, or the cost can be paid by buying minerals... The best way to put it is that the cost to produce is the total of all items and isk needed to make something vs selling them on the open market. It doesn't matter if you have minerals that count for 5000isk value of the mineral cost, the mineral cost is still 8000 isk (not 3000 isk because you had to buy 3000 isk off the market)
Just because you mine it does not mean those minerals have 0 isk value in regards to production costs to produce something. They still have a market value (how they are acquired does not change the fact they have a market value)
The value of an asset does not mean there is no cost to produce something.
To put it as simple as possible:
To determine the cost to produce something you figure in the market values of all items and the associated costs for making it.
The market value of your assets used counts towards this price to produce something if you use them.
PS: You need to remember economics is a science, and uses the scientific meaning of theory vs the common use. So that theory is practicably a law of economics
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Arpad Elo
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Posted - 2009.03.29 12:31:00 -
[34]
Edited by: Arpad Elo on 29/03/2009 12:31:32 sell value whereever you're going to use them, less cost of transportation
(note, cost of transportation is never zero)
edit: I was trying to be a smartypants there and failed - it is zero if you're at location.
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Dariah Stardweller
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Posted - 2009.03.29 13:14:00 -
[35]
I usually value them at the best price I could get for them without too much trouble. So no 10 jump hauls or sell orders that have to run for weeks.
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Governor LePetomane
Rock Ridge Brokerage Solutions
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Posted - 2009.03.29 14:39:00 -
[36]
Originally by: Beth Korai You guys really need to stop equating value with cost; they're not the same thing. I would love for someone to explain how something that cost me zero isk suddenly cost me 10 million isk ifI use it to build something. Just because I CAN sell it for 10 million does NOT mean it has a 10 million isk cost on it suddenly.
Yeah, it's true there's no "cost" in ISK to mine minerals (unless you use crystals or a pos in the process), so minerals you have sitting on your hangar floor have "value" and no "cost," at least in terms of ISK.
However, if you build from those minerals you've essentially exchanged them (and their value) for something else (a product) which, hopefully, has even greater "value" than the minerals.
When you exchange something of value for something else of value that is by definition a "cost" involved in the manufacturing process.
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Kanikara
Gallente Federal Navy Academy
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Posted - 2009.03.29 15:03:00 -
[37]
yeah people forget basic of accounting... and math.
If it has value, then to use it in producing something costs you that value.
So you use say 500 trit that was laying around your hangar in making a couple runs of ammo... that cost you 2000 isk or so in assets.
Simple and easy to understand... which is why most don't get it.
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PassingThrough
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Posted - 2009.03.29 15:37:00 -
[38]
Edited by: PassingThrough on 29/03/2009 15:42:54
It only has value if you have it on your books as such.
The math is simple. 0 x 500 = 0.
In your case you place a value on those assets so what you are saying is true for you.
In my case I don't place a value on those assets so what I'm saying is true for me.
Originally by: Kanikara yeah people forget basic of accounting... and math.
If it has value, then to use it in producing something costs you that value.
So you use say 500 trit that was laying around your hangar in making a couple runs of ammo... that cost you 2000 isk or so in assets.
Simple and easy to understand... which is why most don't get it.
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Breaker77
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Posted - 2009.03.29 15:40:00 -
[39]
Edited by: Breaker77 on 29/03/2009 15:40:35
Originally by: PassingThrough It only has value if you have it on your books as such.
The math is simple. 0 x 500 = 0.
Please use mineral values, not your IQ which you have confirmed by your "Minerals I mine are free"
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Ion Dex
German Space Elite
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Posted - 2009.03.29 15:42:00 -
[40]
no it always has value.
If you produce an item with 4000 trit and you make less by selling the produced item then you would have selling the 4000 trit on the market you would have just lost money.
But if you value your ore at zero you can not possibly make a bad deal because to you it is always 100% profit which is wrong.
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PassingThrough
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Posted - 2009.03.29 15:51:00 -
[41]
That's so wrong that it's not even funny. Why don't you call up Wal-Mart's home office and tell them how much money they are loosing every day. Tell them that they should move their items to the local mom and pop store because they could sell it for a lot more there.
It all depends on how much that 4000 trit cost you not how much it's worth to someone else.
Originally by: Ion Dex no it always has value.
If you produce an item with 4000 trit and you make less by selling the produced item then you would have selling the 4000 trit on the market you would have just lost money.
But if you value your ore at zero you can not possibly make a bad deal because to you it is always 100% profit which is wrong.
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Breaker77
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Posted - 2009.03.29 15:57:00 -
[42]
Originally by: PassingThrough That's so wrong that it's not even funny. Why don't you call up Wal-Mart's home office and tell them how much money they are loosing every day. Tell them that they should move their items to the local mom and pop store because they could sell it for a lot more there.
It's called Economies of scale. Yet again you have proven yourself wrong.
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Ion Dex
German Space Elite
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Posted - 2009.03.29 16:06:00 -
[43]
Edited by: Ion Dex on 29/03/2009 16:06:19
Originally by: PassingThrough That's so wrong that it's not even funny. Why don't you call up Wal-Mart's home office and tell them how much money they are loosing every day. Tell them that they should move their items to the local mom and pop store because they could sell it for a lot more there. It all depends on how much that 4000 trit cost you not how much it's worth to someone else.
You are correct in saying "it's is not even funny" You fail to see that Wal-Mart makes money by selling items dirt cheap and selling them in huge quantities. Now the items Wal-Mart sells do not just magically appear in there stores but are purchased from all over the world. Each item they purchase and place into their store has value. They purchase low and sell high, NOT get the item for free and sell them. Every item has value, there is no way around it or you get 100% profit which you claim you make :)
You also don't take the ore issue far enough. Not only do you have to assign value to your ore in order to know if you are making profit but you also have to assign a value to the time it takes to mine and adding that to the ore. Then compare the number you get to purchasing the ore and picking the item up with a transporter.
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Governor LePetomane
Rock Ridge Brokerage Solutions
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Posted - 2009.03.29 16:20:00 -
[44]
Edited by: Governor LePetomane on 29/03/2009 16:21:07
Originally by: PassingThrough That's so wrong that it's not even funny. Why don't you call up Wal-Mart's home office and tell them how much money they are loosing every day. Tell them that they should move their items to the local mom and pop store because they could sell it for a lot more there.
It all depends on how much that 4000 trit cost you not how much it's worth to someone else.
Hey that's great, actually. It just so happens I'm currently in the process of training up scrap metal reprocessing and I've been looking for somebody like you... somebody who gets it, unlike the rest of these chumps.
If you'd care to evemail me a list of your products and where you sell them I'm quite confident we can come to a mutually beneficial business arrangement.
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Kanikara
Gallente Federal Navy Academy
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Posted - 2009.03.29 16:20:00 -
[45]
Originally by: PassingThrough Edited by: PassingThrough on 29/03/2009 15:42:54
It only has value if you have it on your books as such.
The math is simple. 0 x 500 = 0.
In your case you place a value on those assets so what you are saying is true for you.
In my case I don't place a value on those assets so what I'm saying is true for me.
Originally by: Kanikara yeah people forget basic of accounting... and math.
If it has value, then to use it in producing something costs you that value.
So you use say 500 trit that was laying around your hangar in making a couple runs of ammo... that cost you 2000 isk or so in assets.
Simple and easy to understand... which is why most don't get it.
Well if all the ore you mine, and the minerals you get from it are worth 0 isk on your books... I'll pay you 1 isk for all you mine a day, plus the contract fee.
congratulations you will now make 1 isk profit!
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PassingThrough
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Posted - 2009.03.29 16:32:00 -
[46]
Based on your earlier statement, if Wal-Mart sells something for 3 dollars when they could sell it somewhere else for 4 dollars then they lost 1 dollar for every item that they sell.
That's your logic not mine. I understand selling cheap items in large quantities.
You can't make up your mind though.
Originally by: Ion Dex Edited by: Ion Dex on 29/03/2009 16:18:18 Edited by: Ion Dex on 29/03/2009 16:17:58 Edited by: Ion Dex on 29/03/2009 16:06:19
Originally by: PassingThrough That's so wrong that it's not even funny. Why don't you call up Wal-Mart's home office and tell them how much money they are loosing every day. Tell them that they should move their items to the local mom and pop store because they could sell it for a lot more there. It all depends on how much that 4000 trit cost you not how much it's worth to someone else.
You are correct in saying "it's is not even funny" You fail to see that Wal-Mart makes money by selling items dirt cheap and selling them in huge quantities. Now the items Wal-Mart sells do not just magically appear in there stores but are purchased from all over the world. Each item they purchase and place into their store has value. They purchase low and sell high, NOT get the item for free and sell them. Every item has value, there is no way around it or you get 100% profit which you claim you make
Edit: Yes you are making 100% profit of course because in EvE items do magically appear. But to properly calculate profit you have to assign value to every item.
You also don't take the ore issue far enough. Not only do you have to assign value to your ore in order to know if you are making profit but you also have to assign a value to the time it takes to mine and adding that to the ore. Then compare the number you get to purchasing the ore and picking the item up with a transporter.
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PassingThrough
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Posted - 2009.03.29 16:36:00 -
[47]
Your link just proves my point. Thanks!
I was being sarcastic in my response to him because he seems to not understand the concept. Maybe he can get something from that link.
Originally by: Breaker77
Originally by: PassingThrough That's so wrong that it's not even funny. Why don't you call up Wal-Mart's home office and tell them how much money they are loosing every day. Tell them that they should move their items to the local mom and pop store because they could sell it for a lot more there.
It's called Economies of scale. Yet again you have proven yourself wrong.
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PassingThrough
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Posted - 2009.03.29 16:40:00 -
[48]
Lean to Read English Online
Originally by: Governor LePetomane Edited by: Governor LePetomane on 29/03/2009 16:21:07
Originally by: PassingThrough That's so wrong that it's not even funny. Why don't you call up Wal-Mart's home office and tell them how much money they are loosing every day. Tell them that they should move their items to the local mom and pop store because they could sell it for a lot more there.
It all depends on how much that 4000 trit cost you not how much it's worth to someone else.
Hey that's great, actually. It just so happens I'm currently in the process of training up scrap metal reprocessing and I've been looking for somebody like you... somebody who gets it, unlike the rest of these chumps.
If you'd care to evemail me a list of your products and where you sell them I'm quite confident we can come to a mutually beneficial business arrangement.
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Breaker77
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Posted - 2009.03.29 16:41:00 -
[49]
Originally by: PassingThrough Your link just proves my point. Thanks!
I was being sarcastic in my response to him because he seems to not understand the concept. Maybe he can get something from that link.
I would recommend you take economics when you get to high school.
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Ion Dex
German Space Elite
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Posted - 2009.03.29 16:42:00 -
[50]
I am bored so I am responding to you again.
You claimed earlier that ore has no value via your formula of 0 x 500 = 0 Now let me take this and prove to you that you need to assign value to calculate profit and item vlaue.
I use the formula value * resource + markup to calculate the sales price. This is pretty much what most business do but in a very simple form.
We will build an item which requires 1000 trit and 200 Mexalon and a markup of 5% So according to you: 0 * 1000 + 0 * 200 + ( (0 * 1000 + 0 * 200) * 0.05 ) = 0
Now let's assign 4.10 to trit and 24 to mexalon 4.1 * 1000 + 24 * 200 + ( (4.1 * 1000 + 24 * 200) * 0.05 ) = 9345
As you can see it is impossible to calculate profit or even item value if you don't assign a value to your resources.
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PassingThrough
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Posted - 2009.03.29 16:43:00 -
[51]
Exactly! I'm glad someone else finally gets it.
You posted in the wrong forum though. WTB is
Originally by: Kanikara
Well if all the ore you mine, and the minerals you get from it are worth 0 isk on your books... I'll pay you 1 isk for all you mine a day, plus the contract fee.
congratulations you will now make 1 isk profit!
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Kanikara
Gallente Federal Navy Academy
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Posted - 2009.03.29 16:43:00 -
[52]
Originally by: PassingThrough Based on your earlier statement, if Wal-Mart sells something for 3 dollars when they could sell it somewhere else for 4 dollars then they lost 1 dollar for every item that they sell.
That's your logic not mine. I understand selling cheap items in large quantities.
You can't make up your mind though.
Wrong comparison
Walmart values the stock in their warehouses at > 0 and has a minimum price based on a certain percentage of profit company wide based on that calculation.
So yeah a competitor is selling it for $4 but pays $3.50 to buy it... where walmart buys at $1.50 due to quantity and sales for $3 making far more profit company wide than the little guy competing with them.. who would lose money matching their price.
You are operating like a competitor to bob donuts... who grows his own produce and raises dairy cows and sales at less than bob does.. never mind the large company is buying the ingredients in massive quantities from cheaper areas and even with the transport cost has a lesser cost of production on their products.
Never mind they could have sold the raw ingredients and actually turned a real profit versus a delusional one.. since the milk, flour, eggs and all would have sold for far more than the finished product.
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Governor LePetomane
Rock Ridge Brokerage Solutions
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Posted - 2009.03.29 16:46:00 -
[53]
Originally by: PassingThrough That's your logic not mine. I understand selling cheap items in large quantities.
Here's the flaw in that: in Eve raw minerals move in far larger quantities every day than any single manufactured item. Conversion of minerals to cash in Eve is so close to effortless that they might as well BE cash.
If you're adding multiple extra steps to your production chain and ultimately making less ISK as a result, then like it or not you're not doing a thing Sam Walton would approve of.
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Kanikara
Gallente Federal Navy Academy
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Posted - 2009.03.29 16:49:00 -
[54]
Originally by: PassingThrough Exactly! I'm glad someone else finally gets it.
You posted in the wrong forum though. WTB is
Originally by: Kanikara
Well if all the ore you mine, and the minerals you get from it are worth 0 isk on your books... I'll pay you 1 isk for all you mine a day, plus the contract fee.
congratulations you will now make 1 isk profit!
Well i figure if you value them that low, I'll buy them... and turn around and sell them for several million and make a lot of profit for my 10001 isk.
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PassingThrough
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Posted - 2009.03.29 17:01:00 -
[55]
I prefer:
Profit = [Sell Price ] - [Cost of Materials] - [Production Fees] - [Taxes].
I don't care about what the minerals are valued at by someone else. I only care about what I spent to get them.
What's so impossible about that? I don't mine all of my minerals so I do have some mineral production costs.
I'm not saying that your accounting practice is wrong. I'm just saying that it's not the accounting practice that I use in a video game where most of the reasons for those real life accounting practices don't apply.
You play the game the way you want to and I'll play it how I want to.
At the end of the day I'll be happy about making lots of profit and you'll be upset that someone has undercut you and you are now loosing isk.
Sounds like I win.
Originally by: Ion Dex I am bored so I am responding to you again.
You claimed earlier that ore has no value via your formula of 0 x 500 = 0 Now let me take this and prove to you that you need to assign value to calculate profit and item vlaue.
I use the formula value * resource + markup to calculate the sales price. This is pretty much what most business do but in a very simple form.
We will build an item which requires 1000 trit and 200 Mexalon and a markup of 5% So according to you: 0 * 1000 + 0 * 200 + ( (0 * 1000 + 0 * 200) * 0.05 ) = 0
Now let's assign 4.10 to trit and 24 to mexalon 4.1 * 1000 + 24 * 200 + ( (4.1 * 1000 + 24 * 200) * 0.05 ) = 9345
As you can see it is impossible to calculate profit or even item value if you don't assign a value to your resources.
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PassingThrough
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Posted - 2009.03.29 17:02:00 -
[56]
I may value them low but I love huge profit.
Originally by: Kanikara
Originally by: PassingThrough Exactly! I'm glad someone else finally gets it.
You posted in the wrong forum though. WTB is
Originally by: Kanikara
Well if all the ore you mine, and the minerals you get from it are worth 0 isk on your books... I'll pay you 1 isk for all you mine a day, plus the contract fee.
congratulations you will now make 1 isk profit!
Well i figure if you value them that low, I'll buy them... and turn around and sell them for several million and make a lot of profit for my 10001 isk.
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Ion Dex
German Space Elite
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Posted - 2009.03.29 17:16:00 -
[57]
Edited by: Ion Dex on 29/03/2009 17:16:37
Originally by: PassingThrough I prefer: I don't care about what the minerals are valued at by someone else. I only care about what I spent to get them.
What's so impossible about that? I don't mine all of my minerals so I do have some mineral production costs.
Here is the problem, you can never come up with a sales price on your own if you don't value your materials. You just look at the market, pull a number out of your ass and sell for that price.
At this point I am removing myself from this pointless discussion. You apparently lack the education to understand value so we have to agree to disagree.
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Ashen Angel
Minmatar Ashen's Wings
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Posted - 2009.03.29 17:37:00 -
[58]
Originally by: PassingThrough I may value them low but I love huge profit.
Originally by: Kanikara
Originally by: PassingThrough Exactly! I'm glad someone else finally gets it.
You posted in the wrong forum though. WTB is
Originally by: Kanikara
Well if all the ore you mine, and the minerals you get from it are worth 0 isk on your books... I'll pay you 1 isk for all you mine a day, plus the contract fee.
congratulations you will now make 1 isk profit!
Well i figure if you value them that low, I'll buy them... and turn around and sell them for several million and make a lot of profit for my 10001 isk.
Said profit is false, you would be better off selling your minerals and not even considering production...
Try it for a week or two and compare to how much you make producing stuff...
Might be enough of a shock to wake you up to reality.
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Dreamwalker
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Posted - 2009.03.29 18:31:00 -
[59]
So question I have for Fitz or someone who makes large pieces that go into making something else.
How do you value the item when it takes weeks to make the parts?
Do you value the parts?
Do you value the minerals in the parts and not the parts as a whole?
Do you value the finished product?
I currently have my way but my way has me sitting on inventory for some time as mineral prices adjust to where its profitable again. And no after a weeks time I'm not refining the parts down into minerals so I can sell the minerals.
Originally by: CCP Whisper Local chat in known 0.0, low sec and empire space will remain as it is today, in all it's insta-intel giving, afk cloaker panic inducing, jita trade spamming glory.
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Ashen Angel
Minmatar Ashen's Wings
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Posted - 2009.03.29 18:46:00 -
[60]
Originally by: Dreamwalker So question I have for Fitz or someone who makes large pieces that go into making something else.
How do you value the item when it takes weeks to make the parts?
Do you value the parts?
Do you value the minerals in the parts and not the parts as a whole?
Do you value the finished product?
I currently have my way but my way has me sitting on inventory for some time as mineral prices adjust to where its profitable again. And no after a weeks time I'm not refining the parts down into minerals so I can sell the minerals.
Same way you value a standard item
Mineral costs (which fluctuate), production cost (install cost + time cost), and usually a percentage of the BP cost.
sometimes after producing them, the return from reprocessing them will be worth more than selling the completed module
Of course so will transporting them to a different region, because someone is either liquidating or has poor judgement on pricing
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