| Monday, May 02, 2005 - 03:02 am |
Sorry, I should have said (production * base price) directly effects worst case profitability. Let me illustrate with one of the most resilient corporations I have discovered, software.
Monthly supplies used, and max MP for those supplies:
Books 17.5k x 2000
Computers 32.5k x 4500
Power 0.25k x 180,000
HTS 86.725k x 2000
House prod 3.25k x 30,000
Service 62.5k x 2000
Supply total 622.5M, or 902.2M at a quality of 145
Salary at 150, no effectivity upgrades, 906.4M a month
Monthly costs (excluding interest) 1808.6M
Production (for salary 150) is 1572k units of software. Sell at minimum of price range (800-2000), no quality upgrades. Revenue is 1572k x 800 x 1.45 (quality 145) = 1823.5M
Monthly profit, about 15M when buying supplies at the top of the market and selling at the bottom. If salaries were reduced to 100 the profit would increase to about 300M. Yes you can pay more than market price for supplies and be forced to sell at quite a bit below market price for production, but none the less software corps are very resilient when other corps would be making monthly losses of 5B a month or more under equivalent market conditions.
This worst case profitability is a direct result of (monthly production x base price). Lower production or the base price for the product and you lower its worst case profitability.