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Beer is not cheaper to buy

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1 Beer is not cheaper to buy on Thu Jan 08, 2015 10:07 am

I'm writing this post as a follow up to a long discussion i had with Nisha, Logboy, and one other; Reborn? can't remember clearly who it was now. However, I've heard some other people thinking this thought before and never quite understood why anyone would think it's cheaper to buy Beer rather than produce it.

So I went ahead and calculated the production costs for Beer and will display the results here. The short answer is that unless you're getting Beer at a price around 875 gold apiece or so, then no, it's not cheaper to buy.

First of all, why would any commodity be cheaper to buy than produce? That doesn't make any sense. If that was the case then the sellers are always making a loss. I understand that sometimes sellers simply want to offload something they have a major surplus of and so might set a very low price, but this isn't the general case. I don't know if spreading this idea that Beer is cheaper to buy was some conspiracy for Beer producers to make a profit selling it, or whatnot but it's simply not true.

The table below is a section of my spreadsheet. The production costs for a single beer (depending on batch size) are in the final column to the right. The batch size is the first column on the left. If you're wondering why I have different costs depending on the batch sizes then you should read my other post on how to set trading prices http://annoios.forumotion.com/t29-setting-trade-prices-the-cost-of-trading.

A final note, although already explained somewhat in my other post, the reason why using $/item is no good is because we want to compare the cost of producing beer to the cost of purchasing beer. Beer is never purchased in single item quantities, but in batches, therefore to compare you need to use the same unit.

Here are the results calculated using the same method explained in my other post. The only difference is that I have now added shipping times and variable ship upkeep depending on the sizes of the ships into my calculations to make them more accurate. Of course these costs include the production costs of wheat and herbs:




Other assumptions made:

  1. Transport ships are always fully loaded to their max capacity with only the product and therefore transport in one direction
  2. Beer is produced on the herbs island and therefore 2 shipments are required to get the final product to Newport; one taking wheat to herb island, another taking Beer to Newport. If you are producing both wheat and Beer on Newport then only 1 shipment is required to bring herbs to newport resulting in even lower production costs



Last edited by Tea on Thu Jan 08, 2015 10:37 am; edited 1 time in total

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2 Re: Beer is not cheaper to buy on Thu Jan 08, 2015 10:27 am

hi tea, yep that was me in the long discution Wink
I do agree with you, beer is not cheaper to buy, as when you buy good you do have to count you "batch" thing (sorry not english native but I kinda understand what you mean by it^^)
the point is as beer costs 840 to produce 1 (see my post^^), it is no longer worth selling it... but that doesn't mean it is worth buying it...
because as I answerd in your previous post, it's not up to the seller to pay for shipment, but it's up to the buyer so for beer to be better buying than producing, it need to be less than 840-shipping cost.... of course shipping cost depends on your ship....

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3 Re: Beer is not cheaper to buy on Thu Jan 08, 2015 10:44 am

Thanks for visiting and commenting Reborn. The only place I am including shipment costs is not in the buying end but in the seller's end when the resource or product needs to be shipped say from the herb island to Newport so that it can then be sold, for example. You could choose to ignore this cost if you wanted to and it would simply be a different method.

I choose to include it because I want to treat the production and sale of a product as an independent operation. Therefore all the costs involved in producing and selling the product should be included. Technically I could also include the costs of distribution houses but I chose to ignore that because 1) it's very small and negligible, 2) distribution houses are usually shared by other resources for me anyway so i don't want to include it here.

The other subtle point is about breakeven costs varying depending on the buyer's ship size. This is for 2 reasons:
1) The larger the ship the more amount you can sell in roughly the same amount of time. Therefore the maintenance costs of the pier and trade storehouse are divided by a larger number of product sold during that time.

2) If you are selling larger batches it means you must also be producing more in the same amount of time. Therefore you need more production units to meet this production so that increases the production cost to a degree, but generally it is favorable overall.

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4 Re: Beer is not cheaper to buy on Thu Jan 08, 2015 12:40 pm

Ok now I understand why you include shipping in the price but you only have to ship in the beer producting as herb and wheat can't be produce in the same island... For every other goods (until 500imp at least) you don't need any ship to sell good...
And even for beer, its no longer 43min but only 30 or so (transport ship is 15min)

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5 Re: Beer is not cheaper to buy on Thu Jan 08, 2015 4:31 pm

You are absolutely right about the time for transport ships and I do take this into account. That is why in my breakeven tables you see I have a column for transportation times as well as a column for trading time. For the transportation costs I use the time for transport ships.

I'm not sure what you mean about not needing ships to sell other goods. Anything that requires another island to produce even a single part of the production chain will require at least 1 shipment back to newport unless you have a pier and trade storehouse on all your islands. Hemp for example will require either that you ship hemp back to Newport to produce linen there, or if you produce the linen on hemp island then you must transport it back to Newport if you want to sell it so that too requires shipping costs.

In my calculations I assume that products are produced on the other islands, not on Newport, but if you have a different setup then it may affect your calculations depending on number of shipments you need to make to produce the final product and to get the product to the trade storehouse.

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6 Re: Beer is not cheaper to buy on Fri Jan 09, 2015 3:10 am

Then I guess you are right Wink...
and yeah, I have trade storehouse on each island, easier to sell product but also to buy indigo or stuff like that on other islands Wink

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7 Re: Beer is not cheaper to buy on Fri Jan 09, 2015 5:31 am

Actually in the OP I forgot to include the upkeep costs of the trade ship, trade storehouse, and pier for if you want to buy beer. When you include those costs it makes the favorable price for buying over producing even lower, much lower. See below.

The Cost/item column is the production costs in comparison to the costs of buying, and the final column on the right Profitable Price/item shows the price you'd need to find for purchasing to be actually cheaper than producing your own.


Also, Reborn, you did make a good point that I didn't think about before that it's possible to have multiple buyers buying at the same time. This would certainly affect my calculations and significantly lower my breakeven prices if that were the case. However, you never know if you will have multiple buyers at once, in fact it's often the case that you wait for a while before someone buys your product so to get a safe/conservative calculation it's better to assume only 1 buyer at a time.

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