Frugal Crafting ?

[A2152225]

So specifically, I am trying to discern how this works and from the way its worded it sounds so much more powerful i think, but my opponent says it cannot possibly work that way.
Frugal crafter: http://www.d20pfsrd.com/feats/3rd-party-feats/kobold-press/general-feats---3rd-party---kobold-press/frugal-crafting

"The cost of creating magic items is reduced to 1/3 its base cost in raw materials." < the line most of the argument is based on.

with the scenario of creating a cloak of charisma (+2).
market price: 4000g
I read it as the cost is reduced to be 1/3rd of the cost of raw materials normally needed, so, if at full price its 4000g, 1/2 price(raw material cost) it would be 2000, and with the feat it would be more like 1/3rd x the cost of the raw materials, 2000 for a total of 666g (rounded). 
My opponent in the matter suggests that its worded as 1/3rd the market price, so, instead of it being 2000, its 1,333g (rounded)

So I come asking, with how it is written, what is the proper way it would be in effect?

[Squirel_Dude]

It's 1/3 the base cost of the item, before you split that number in half for raw material cost. It does not say that the price is 1/3 the base price of the raw materials, but that the cost of crafting an item is equal to 1/3 the base price in raw materials. To turn that sentence around. Raw materials equal to 1/3 the base price of an item is the cost to craft an item.

I think that interpretation is strengthened when it is noted that by making the cost for mundane items 1/4 their price it is simply shifting the price for all crafting down to the next smallest fraction. Magical crafting goes from 1/2 to 1/3. Mundane crafting goes from 1/3 to 1/4.

Your opponent is right.

[kitep]

DMG, p283, 1st full paragraph

Magic supplies for items are always half of the base price in gp
and 1/25 of the base price in XP. For many items, the market price
equals the base price. For example, a cloak of elvenkind has a market
price (and base price) of 2,500 gp. Making one costs 1,250 gp in
raw materials plus 100 XP.

Definately looks like your opponent is right.

Note: this is 3.5  Pathfinder may be different.

[NunoM]

I think the problem might be the wording used... Interchangeably using the words "price" and "cost" may be confusing at times, but either way, i also believe your friend is correct.

The 1/3 and 1/4 deduction is based on the market (i.e. consumer) price; it's not a further deduction to the cost of production.