Make-Buy, Outsourcing & Network Design worked example

Make vs Buy Cost at 72% in-house capacity utilization: a worked example

This worked example runs the make vs buy cost numbers for a tougher week than the baseline: 72% in-house capacity utilization instead of the typical 100%. Compute the fully loaded internal cost of making a part so it can be weighed against the buy quote.

The inputs for this scenario

  • Annual part volume: 25,000 parts/yr (held at the documented default)
  • Internal unit cost to make: 14.5 $/part (held at the documented default)
  • In-house capacity utilization: 72 % (the input this scenario stresses; the baseline uses 100)
  • In-house tooling investment: 60,000 $ (held at the documented default)

Working through the calculation

  • The calculation starts from the formula this tool documents: Make cost = annual volume x internal unit cost x utilization% + tooling investment.
  • Total make vs buy cost works out to 321,000 $ at these inputs, and this is the headline figure for the scenario.
  • Make vs buy cost per unit works out to 12.84 $ / piece at these inputs.
  • Variable make vs buy cost works out to 261,000 $ at these inputs.
  • Fixed make vs buy cost adder works out to 60,000 $ at these inputs.

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 24.02% below the baseline at 321,000 $.
  • Use it early in a make-vs-buy or reshoring decision to establish the loaded internal cost the supplier quote must beat. 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

  • Total make vs buy cost: 321,000 $ (headline result)
  • Make vs buy cost per unit: 12.84 $ / piece
  • Variable make vs buy cost: 261,000 $
  • Fixed make vs buy cost adder: 60,000 $

Run it with your numbers

  • To rerun this with your own numbers, open the live Make vs Buy Cost calculator, set in-house capacity utilization to your actual value, and adjust the remaining inputs to match your operation.

Last reviewed 2026-05-12.