What overhead belongs in the make case?

Only the fixed cost that ends if you buy, such as a dedicated supervisor or leased cell. Plant rent and shared services continue either way.

How is the indifference volume used?

It is the annual volume where the two cost the same. Below it the option with the lower unit cost wins; above it the other one does.

Should I include quality loss for the internal option too?

Yes, if internal scrap and rework are not already in the internal unit cost. Put every defect cost in one place: inside each unit cost or in its own line.

When should I look beyond the cost gap?

When the gap is small or volumes sit close to the crossover. Lead time, capacity and supplier risk can outweigh a narrow saving.

Costing calculator

Make vs Buy Calculator

Compare what it costs to make a part in house with what a supplier charges landed. The tool prices both at your annual volume and finds the volume where the two are level.

What this calculator does

Compare annual make and buy cost at your volume, with the landed buy unit cost and the break-even volume.

Formula used

Make cost = internal unit cost × annual volume + avoidable fixed overhead
Landed buy unit cost = supplier price + freight + supplier quality loss
Buy cost = landed buy unit cost × annual volume; savings to make = buy cost − make cost
Make unit cost at this volume = make cost ÷ annual volume
Indifference volume = avoidable fixed overhead ÷ (landed buy unit cost − internal unit cost), blank when landed is below internal

Inputs explained

Internal Unit Cost: Your variable cost to make one unit, from the routing.
Supplier Price: Quoted purchase price per unit before freight.
Freight per Unit: Inbound freight per unit from the supplier quote.
Supplier Quality Loss per Unit: Expected rework and rejection cost per supplier unit.
Avoidable Fixed Overhead: Fixed overhead that ends if the part is bought.
Annual Volume: Units needed per year from the demand forecast.

How to use the result

Best suited to screening a supplier quote for outsourcing, deciding whether to keep a part in house, setting the volume where a sourcing switch pays.
A blended internal cost hides the parts that carry the plant; decide part by part. Supplier price, freight and quality can change after the quote. Freed capacity is only worth its avoidable overhead unless filled with other work.

Current U.S. benchmarks

U.S. manufacturing runs at 75.7% of capacity (Federal Reserve, Aug 2026). New factory orders are up 8.5% year over year (Census).

Common questions

What overhead belongs in the make case? Only the fixed cost that ends if you buy, such as a dedicated supervisor or leased cell. Plant rent and shared services continue either way.
How is the indifference volume used? It is the annual volume where the two cost the same. Below it the option with the lower unit cost wins; above it the other one does.
Should I include quality loss for the internal option too? Yes, if internal scrap and rework are not already in the internal unit cost. Put every defect cost in one place: inside each unit cost or in its own line.
When should I look beyond the cost gap? When the gap is small or volumes sit close to the crossover. Lead time, capacity and supplier risk can outweigh a narrow saving.

Related guides

Last reviewed 2026-10-01.