Costing worked example

Make vs Buy with internal unit cost of 4.9 $ / unit: a worked example

This worked example runs the make vs buy numbers for a tougher week than the baseline: internal unit cost of 4.9 $ / unit instead of the typical 9.8 $ / unit. Compare internal manufacturing cost against supplier purchase cost after freight, quality, and overhead.

The inputs for this scenario

  • Internal unit cost: 4.9 $ / unit (the input this scenario stresses; the baseline uses 9.8)
  • Supplier price: 10.65 $ / unit (held at the documented default)
  • Freight per unit: 0.42 $ / unit (held at the documented default)
  • Supplier quality loss: 0.18 $ / unit (held at the documented default)
  • Internal fixed overhead: 24,000 $ / yr (held at the documented default)
  • Annual volume: 45,000 units / yr (held at the documented default)

Working through the calculation

  • The calculation starts from the formula this tool documents: Make annual cost = internal unit cost × volume + internal overhead.
  • Savings to make works out to 261,750 $ / yr at these inputs, and this is the headline figure for the scenario.
  • Make cost works out to 244,500 $ / yr at these inputs.
  • Buy cost works out to 506,250 $ / yr at these inputs.
  • Buy unit cost works out to 11.25 $ / unit at these inputs.

How this compares with the baseline

  • Against the tool's baseline example, where internal unit cost sits at 9.8 $ / unit and the headline result is 41,250 $ / yr, this scenario comes in 535% above the baseline at 261,750 $ / yr.
  • Use it when evaluating outsourcing a part, responding to a supplier quote, or justifying keeping production in-house during a capacity or capital decision. A result at this level usually justifies acting on the stressed input before touching anything else, because every other figure in the table is downstream of it.

Results at a glance

  • Savings to make: 261,750 $ / yr (headline result)
  • Make cost: 244,500 $ / yr
  • Buy cost: 506,250 $ / yr
  • Buy unit cost: 11.25 $ / unit

Run it with your numbers

  • To rerun this with your own numbers, open the live Make vs Buy calculator, set internal unit cost to your actual value, and adjust the remaining inputs to match your operation.

Last reviewed 2026-05-12.