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What profit actually costs you

Every component of a real profit figure, and why most estimates are too high.

Core concepts · 7 min read

The five costs

A unit of anything you produce carries five costs. Miss one and your profit estimate is wrong in the optimistic direction.

Materials. What the inputs cost you, at the price you actually paid — not the price you wish you had paid.

Wages. Your building pays a fixed amount per hour per level. Spread across the units it produced in that hour, this becomes a cost per unit. A building running at half capacity pays full wages.

Administration overhead. A percentage that multiplies your wage bill. It rises as your company grows, which is why a production line that was profitable at ten buildings can stop being profitable at thirty.

Transport. Goods need moving, and that costs money per unit shifted.

The exchange fee. Selling on the Exchange takes a percentage of the sale. You never receive the sticker price.

Administration overhead is the one people forget. It is not charged per building — it scales with your whole company, so a new building quietly raises the cost of every existing one.

Putting it together

Cost per unit is materials plus wages-per-unit plus transport. Revenue per unit is your sale price minus the exchange fee. Profit per unit is the difference. Multiply by units per hour and you have the number that matters.

A worked example
Building: produces 10 units/hour at level 1, wages $100/hour
Wages per unit:      $100 / 10          = $10.00
With 20% overhead:   $10.00 x 1.20      = $12.00
Materials per unit:                       $6.00
Total cost per unit:                      $18.00
Sale price $30, less 3% fee:              $29.10
Profit per unit:     $29.10 - $18.00    = $11.10
Profit per hour:     $11.10 x 10        = $111.00

Break-even, and why you should know it

Your break-even price is the sale price at which profit is exactly zero. Below it, every unit you produce loses money.

Knowing it turns a vague worry into a decision. When the market price of your output drops, you do not have to guess whether to keep producing — you compare it to a number you already have.

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