Make-Buy, Outsourcing & Network Design worked example

Make vs Buy Cost at 110% in-house capacity utilization: a worked example

Push in-house capacity utilization up to 110% and the picture changes. This example computes every intermediate figure at that operating point. A sourcing engineer deciding whether to insource a part or keep buying it from a supplier.

The inputs for this scenario

  • Annual part volume: 25,000 parts/yr (unchanged)
  • Internal unit cost to make: 14.5 $/part (unchanged)
  • In-house capacity utilization: 110 % (raised for this scenario; the documented default is 100)
  • In-house tooling investment: 60,000 $ (unchanged)

Working through the calculation

  • Applying the documented formula (Make cost = annual volume x internal unit cost x utilization% + tooling investment) to the inputs above produces each figure below.
  • At this operating point the engine returns 458,750 $ for total make vs buy cost, the number this scenario is built around.
  • At this operating point the engine returns 18.35 $ / piece for make vs buy cost per unit.
  • At this operating point the engine returns 398,750 $ for variable make vs buy cost.
  • At this operating point the engine returns 60,000 $ for fixed make vs buy cost adder.

How this compares with the baseline

  • Against the tool's baseline example, where in-house capacity utilization sits at 100% and the headline result is 422,500 $, this scenario comes in 8.58% above the baseline at 458,750 $.
  • It calculates total in-house make cost as annual volume times internal unit cost times utilization, plus the tooling investment, then divides by volume for a fully-loaded cost per part. The value of this scenario is the size of the gap it exposes: that gap, priced out over a year, is the budget you can justify spending to close it.

Results at a glance

  • Total make vs buy cost: 458,750 $ (headline result)
  • Make vs buy cost per unit: 18.35 $ / piece
  • Variable make vs buy cost: 398,750 $
  • Fixed make vs buy cost adder: 60,000 $

Run it with your numbers

  • Every input above is editable in the live Make vs Buy Cost calculator, which recalculates instantly and can be shared with the inputs intact.

Last reviewed 2026-05-12.