factory losing money

[unmerged(173513)]

I'm sorry if this questions have been asked before, but I cannot seem to find answers. I'm playing as Brazil. I have several steel factories, all of them profitable. I also have a lumber one which is also profitable. Next I built a furniture and a machine parts factory. Both of them are losing money and I'm wondering why.

Both factories have about 10-15% efficiency so I'm sure that's a factor. But furniture is expensive on the market; the going rate is about 60 per unit. I figure the demand should be decent since it is a basic need for most POPs. Its also needed for creating clerks and craftsmen. But the factory is always at breakeven or at a slight loss.

The MP factory is consistently losing about 8 units of currency (per day, month? Not sure?). Is it worth keeping either of these factories going despite the loss. MP are essential of course, but I don't have a problem buying them from the world market. Is the 8 currency loss more than I spend on buying from the market (current rate is also about 60).

 

[unmerged(173513)]

How is factory profit calculated anyways? Has anyone derived the formula for it?

 

[EUnderhill]

Factory efficiency only tells how fully staffed the factory is, not the throughput efficiency. A higher "efficiency" in that sense only means you will lose even more money if running in the red. Revolutions or base Victoria?

Factory profit is simply output value minus input value.

 

[Orm]

Compared to buying machine parts I'm sure it's better to produce the ones you need whatever the factory efficiency is. There is absolutely no point however to sell to the WM at a loss. Close down the factories that run at a loss, or if you want your capitalists (provided you play Revolutions) to be able to build other factories, keep it running at minimum staff.

 

[fbaker4]

It's probably the input cost.

A simple example:

2 input units A + 1 input unit B = .5 output unit C

Input units are 100% true cost; I'm not sure if output value is a factor of efficiency. We'll assume it's not for this.

If input unit A is $5
and input uint B is $5 then total cost of inputs is $15;
if output unit C is $20, then total value of outputs is $10

net loss = $5

Natually, if efficiency is a factor in the quantity of outputs, then the value of the output changes.

But that's my guess. The inputs! Long the bane of capitalists everwhere.
maybe taxes also

 

[EUnderhill]

In Revolutions bear in mind that even a money-losing factory can be helpful by steering money to capitalist through export of the output and purchase of the inputs (at treasury expense) from WM.

 

[unmerged(173513)]

Sorry I forgot to mention I'm playing vanilla Victoria (v. 1.04). So I'm building my own factories. When I mention factory efficiency I'm talking about the true efficiency, the one displayed in the ledger for each factory. The one shown in the state view is different I know.

So I guess I need to bring down the prices of the inputs by producing them myself. Or increase efficiency.

Thanks for all the help.

So, just to see if I understand this right, if a factory shows a loss this doesn't mean that money is being deducted from my treasury right? Or is this wrong? If so, how often am I losing money?

 

[fbaker4]

On Ricky, you are losing that money from the treasury, and daily. It can get ugly quick...

 

[kossmikman]

You will only lose money if you need to import the raw goods. You could also say that you lose money by not exporting those materials. In any case, keep those factories if you need the output. Some tech may also make the factory profitable. Demand might also change throughout the course of the game.

 

[fbaker4]

and you will 'lose money' if the cost of the inputs (no matter if you have to buy them on the WM or not, if you could sell them to the WM, then there is a revenue associated with that) plus the cost of the pop (you could aways promote the pop to officers, or clergy, or capitalists, which costs, but over time might make up for the cost in tax & tarrif revenue v. services required) is in excess of the value of the finished product to the WM.

using hypothetical #...

1 farmer pop that generates $1 in tax, and $0 in tarrif revenue, and 1 unit of cotton (equiv. to $1 on the WM) per annum is a $2 unit of labor.

The promote cost to craftsman is net $3000; and causes a drop in cotton production (-$1) but now generates $5 in tax and $5 in tarrif, and works in a fabric factory that converts 5 cotton to 1 fabric (cost -$1*5; for inputs, $10 for outputs). So then, we have a sunk cost of $3000, and net annual costs of -1+5+5-5+10 = $14. 3000/14 = ~215 years for the sunk cost to be paid off...and another (215*2)/14 = ~27 years to offset the farmer's labor over that same time. So if you have 245 years, factories are great!

lol.

The funny thing about all this is that it overlooks the value in things like research that certain pops make (clerks, esp.) and the fact that by saving $ on a GNP basis, the game doesn't provide a benefit. So if you have excess capital, then the sunk costs are mitigated, and the craftsman becomes a +$12 net capital gain, immediately!

Hence, the drive for Capitalist Imperialization!! Cheap inputs from the Periphery offset the shift in production from basic to finished good in the Metropol!

yay Capitalism!

 

[unmerged(173513)]

Thank you all for helping me figure this out. Now I have a grasp of how it works. Even if your factory is "losing money", you don't actually lose money from your treasury until you sell the resource on the WM. If I'm using the machine parts then it's not lost revenue per say. Also I wouldn't lose money directly. The machine parts if sold on the WM would generate negative revenue which is subtracted from your POPs export income (nothing comes out of my treasury yet), and at this point it reduces my tax income. So I lose money indirectly.

So I think it's okay to produce items at a loss initially if they are critical for your industry, not for generating income.

 

[unmerged(173513)]

fbaker4,

Your'e off on your calculations I believe. If it works the way you calculate it in this scenario, converting laborers or farmers to craftsmen would hardly be a good choice. But that is not the case.

The $14 net profit generated from the newly converted craftsman is per DAY, not per year. So it would pay for itself in about 2/3 of a year. Not a bad investment.

and you will 'lose money' if the cost of the inputs (no matter if you have to buy them on the WM or not, if you could sell them to the WM, then there is a revenue associated with that) plus the cost of the pop (you could aways promote the pop to officers, or clergy, or capitalists, which costs, but over time might make up for the cost in tax & tarrif revenue v. services required) is in excess of the value of the finished product to the WM.

using hypothetical #...

1 farmer pop that generates $1 in tax, and $0 in tarrif revenue, and 1 unit of cotton (equiv. to $1 on the WM) per annum is a $2 unit of labor.

The promote cost to craftsman is net $3000; and causes a drop in cotton production (-$1) but now generates $5 in tax and $5 in tarrif, and works in a fabric factory that converts 5 cotton to 1 fabric (cost -$1*5; for inputs, $10 for outputs). So then, we have a sunk cost of $3000, and net annual costs of -1+5+5-5+10 = $14. 3000/14 = ~215 years for the sunk cost to be paid off...and another (215*2)/14 = ~27 years to offset the farmer's labor over that same time. So if you have 245 years, factories are great!

lol.

The funny thing about all this is that it overlooks the value in things like research that certain pops make (clerks, esp.) and the fact that by saving $ on a GNP basis, the game doesn't provide a benefit. So if you have excess capital, then the sunk costs are mitigated, and the craftsman becomes a +$12 net capital gain, immediately!

Hence, the drive for Capitalist Imperialization!! Cheap inputs from the Periphery offset the shift in production from basic to finished good in the Metropol!

yay Capitalism!

 

[EUnderhill]

Thank you all for helping me figure this out. Now I have a grasp of how it works. Even if your factory is "losing money", you don't actually lose money from your treasury until you sell the resource on the WM. If I'm using the machine parts then it's not lost revenue per say. Also I wouldn't lose money directly. The machine parts if sold on the WM would generate negative revenue which is subtracted from your POPs export income (nothing comes out of my treasury yet), and at this point it reduces my tax income. So I lose money indirectly.

So I think it's okay to produce items at a loss initially if they are critical for your industry, not for generating income.

No - The "loss" is the difference between for what you sell the finished product and what you could have made selling the inputs. Some of this "loss" appears as lower tax revenue than you could have garnered and some is less export income available to your POPs. A machine part made costs the opportunity to sell the coal and steel to the WM or the price of importing the coal and/or steel. A machine part used is revenue forfeited from its sale to the WM. An MP sold to the WM is revenue distributed to your POPs and taxed regardless of whether the display shows a "loss" or not.

A loss means that it is better to import (if available) the item needed for your industry all the while bearing in mind that the treasury bears all of the import cost but only gains a portion of the export revenue, unless taxes and tax efficiency are 100%. Thus a "profitable" item can still be a drain on the treasury if the cost of imported inputs is less than the revenue taken back in taxes.

 

[fbaker4]

lol, yes, SuperAlf - of course - all 'years' should be days. haha on me. Can't believe that I somehow missed that.