Calculator Inputs
Example Data Table
| Scenario | Annual Units | In-house Cost/Unit | Outsource Cost/Unit | Preferred Option |
|---|---|---|---|---|
| Low volume pilot | 2,500 | USD 31.40 | USD 28.90 | Outsource |
| Steady production | 10,000 | USD 24.80 | USD 28.10 | In-house |
| High volume ramp | 40,000 | USD 21.15 | USD 25.60 | In-house |
Formula Used
In-house labor per unit = Labor hours per unit × Labor rate per hour
In-house base variable cost = Material + Labor + Variable overhead + Inventory carrying
In-house scrap cost per unit = In-house base variable cost × Scrap rate
In-house rework cost per unit = Rework cost per affected unit × Rework rate
In-house fixed allocation per unit = (Fixed overhead annual + Setup annual) ÷ Annual units
In-house total cost per unit = Base variable + Scrap cost + Rework cost + Fixed allocation
Outsource variable cost per unit = Supplier price + Freight + Duty + Inspection + Inventory carrying
Outsource defect impact per unit = Defect cost per affected unit × Supplier defect rate
Outsource fixed allocation per unit = (Tooling annual + Vendor management annual) ÷ Annual units
MOQ penalty total = (Effective outsourced units − Annual units) × Supplier price
MOQ penalty per unit = MOQ penalty total ÷ Annual units
Outsource total cost per unit = Variable cost + Defect impact + Fixed allocation + MOQ penalty per unit + Safety stock carrying per unit
Annual total cost = Total cost per unit × Annual units
Required selling price for target margin = Total cost per unit ÷ (1 − Target margin %)
How to Use This Calculator
- Enter the product name, reporting currency, and expected annual production quantity.
- Fill in the internal manufacturing assumptions, including material, labor, overhead, scrap, rework, and inventory carrying values.
- Enter the outsourcing assumptions such as supplier price, freight, duties, inspection, defect rates, tooling, MOQ, and safety stock.
- Provide a selling price and target margin if you also want commercial pricing guidance.
- Click Compare Costs to display the result summary above the form.
- Review the graph to compare total annual cost, cost per unit, and pricing implications.
- Use the CSV and PDF buttons to export the comparison for reporting or sourcing discussions.
Frequently Asked Questions
1. What does this calculator compare?
It compares total in-house and outsourced manufacturing cost using materials, labor, overhead, freight, defects, MOQ impact, tooling, and carrying costs.
2. Why include scrap and rework?
Scrap and rework often change the true cost per good unit. Ignoring them can make an option look cheaper than it really is.
3. What is MOQ penalty?
MOQ penalty reflects extra spend when supplier minimum order quantity exceeds your actual annual requirement. It helps expose hidden outsourcing cost.
4. Can this calculator support make-versus-buy decisions?
Yes. It is designed for sourcing reviews, budget planning, cost engineering, and scenario analysis before shifting production internally or externally.
5. Why is annual volume important?
Annual volume spreads fixed costs across more units. Higher demand usually improves internal economics when fixed factory cost is significant.
6. Does lower supplier price always mean outsourcing wins?
No. Freight, quality losses, compliance activity, stock buffers, tooling, customs, and vendor management can erase an apparent unit-price advantage.
7. What does break-even volume mean?
Break-even volume estimates the production quantity where both options cost roughly the same. Above or below it, one route may become preferable.
8. Can I use any currency?
Yes. Enter any symbol or code, such as USD, EUR, GBP, or PKR. Keep all input costs in the same currency.