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--- gamemanual:pricing_metrics [2021/12/15 15:04] – [Manufacturing Costs] admin
+++ gamemanual:pricing_metrics [2022/02/15 18:00] (current) – external edit 127.0.0.1
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+=== Video Tutorials ===
+  * [[http://gearcity.info/tutorials/_TutorialVideos/02_tuc.html|Total Unit Costs]] ([[https://youtu.be/ECIuuP8TkBE|Youtube]])
+  * [[http://gearcity.info/tutorials/_TutorialVideos/01_sdp.html|Supply, Demand, and Pricing]] ([[https://youtu.be/hDJnuK8hvkk|Youtube]])
 ====== Pricing Metrics ======
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 Therefore, the Manufacturing Costs are the Material Costs + $500 in this particular example.
+===== Total Unit Costs =====
+Total Unit Costs uses the variables that make up Manufacturing Costs, and it includes a single unit's portion of ALL other company expenses.
+For example, you’re building a new factory at the cost of $750,000 a month. Your branches cost $500,000 a month. Your labor costs another $620,000 per month, and you’re spending another $130,000 on marketing, racing, research, etc. In total, your non-manufacturing-related expenses are $2,000,000 per month. If you're building 5,000 total vehicles of all models per month, company costs per unit are $400. We add this number to the manufacturing costs, and that is your total unit costs.
+----
+====== How **Not** To Use These Metric ======
+A common pitfall many new CEO find themselves in is increasing the price of their vehicles based on the Manufacturing Costs or the Total Unit Costs. This action leads to a demand death spiral. As you increase prices, demand drops. Both the Manufacturing Costs and Total Unit Costs depend on the number of units produced. So if demand drops and you reduce production to match that, your Manufacturing and Total Unit Costs will go up. If you increase prices again to match the new values, the cycle will repeat until you are bankrupt.
+----
+====== How To Use These Metric ======
+You should price your vehicle based on Material Costs. The Manufacturing Costs and Total Unit Costs are indicators of potential profitability if you sold ALL vehicles produced at exactly these prices. You should not be pricing your vehicles with these variables. Instead, use them as indications if your costs are too high or if production is too low.
+You should find ways to lower the Manufacturing and Total Unit Costs below your sale price, rather than increase your prices to match them. One common way to decrease both is to increase the number of units you produce. You can also try to reduce your company costs, or increase margins with other models to compensate for the difference.