Make or Buy Calculator
Compare making a part with buying it, and find the cross-over volume.
In short
Compare making a part with buying it, and find the cross-over volume.
Formula: Cost to make = (Volume × Cost to make per unit) + Avoidable fixed cost + One-off cost; Cost to buy = (Volume × (Price + Freight per unit)) + One-off cost
What this calculator does
Only costs that change with the decision are counted. The cross-over volume is the difference in fixed and one-off costs divided by the difference in per-unit cost.
Use it to turn Currency, Units required, Cost to make, per unit, Fixed cost avoided if you stop making (optional), and the other shown inputs into a checked result you can compare, copy, or rerun with different assumptions.
The page shows the formula, a numeric worked example, and the assumptions that affect this professional & industry calculation.
Inputs and what they mean
- Currency
- — Amounts are shown in the currency you pick. No exchange rate is applied..
- Units required
- — number value.
- Cost to make, per unit
- — number value.
- Fixed cost avoided if you stop making (optional)
- — Optional component. Leave at 0 to exclude it from the result..
- One-off cost of making (tooling, setup) (optional)
- — Optional component. Leave at 0 to exclude it from the result..
- Purchase price per unit
- — number value.
- Freight and duty per unit (optional)
- — Optional component. Leave at 0 to exclude it from the result..
- One-off cost of buying (qualification, transition) (optional)
- — Optional component. Leave at 0 to exclude it from the result..
How to use it
- Enter your own figures — the calculator never fills in a rate, price or benchmark for you.
- Press Calculate to see the result.
- Read the formula, variables, assumptions and source below the result before you rely on it.
Formula
Cost to make = (Volume × Cost to make per unit) + Avoidable fixed cost + One-off cost; Cost to buy = (Volume × (Price + Freight per unit)) + One-off cost.
Inputs used: Currency, Units required, Cost to make, per unit, Fixed cost avoided if you stop making (optional), One-off cost of making (tooling, setup) (optional), Purchase price per unit, Freight and duty per unit (optional), One-off cost of buying (qualification, transition) (optional).
Edge handling: Units required is required.; Units required cannot be negative.; Units required must be no more than 1000000000000.; Cost to make, per unit is required.; Cost to make, per unit cannot be negative..
Worked example
5,000 units: make at $12.40 or buy at $13.90
- Start with Currency: USD, Units required: 5000, Cost to make, per unit: 12.40, Fixed cost avoided if you stop making (optional): 0, One-off cost of making (tooling, setup) (optional): 0, Purchase price per unit: 13.90.
- Apply the method: Cost to make = (Volume × Cost to make per unit) + Avoidable fixed cost + One-off cost; Cost to buy = (Volume × (Price + Freight per unit)) + One-off cost.
- Only the costs that change with the decision belong in the comparison.
Reading the result
The headline figure is the main answer. Any breakdown underneath shows the parts that make it up, so you can check the working and see what changes when you adjust an input.
Limitations and assumptions
- Inputs outside the supported range are rejected rather than forced into a result.
- The result depends on the values you enter for this make or buy calculator; it does not supply missing rates, rules, prices, dates, or assumptions for you.
Reference: Rice University — Principles of Accounting, Volume 2: Managerial Accounting
Last reviewed:
Common questions
Where does this formula come from?
Principles of Accounting, Volume 2: Managerial Accounting (OpenStax) — a make-or-buy comparison counts only the costs that change with the decision; costs incurred either way are irrelevant to it. See the source link on this page.
What kind of calculation is this?
A relevant-cost comparison at a stated volume, with the cross-over volume where the two options cost the same. Check the formula, example, and limitations on this page before using the result for a real professional & industry decision.
What are its limits?
Arithmetic over the figures entered — it cannot tell whether the costs, standards or allowances behind them are right. A target cost, an industry benchmark and the organisation's own standard are different things; only the figures entered are used. Cost only: quality, lead time, capacity, intellectual property and supply risk are not in the arithmetic. A single volume point; demand that varies should be tested at more than one volume.
How do I use the Make or Buy Calculator?
Enter the required values for Currency, Units required, Cost to make, per unit, Fixed cost avoided if you stop making (optional), One-off cost of making (tooling, setup) (optional), and the other fields shown. The calculator applies the formula on this page and shows the main result with any supporting breakdown so you can check the arithmetic.
What formula does the Make or Buy Calculator use?
Cost to make = (Volume × Cost to make per unit) + Avoidable fixed cost + One-off cost; Cost to buy = (Volume × (Price + Freight per unit)) + One-off cost The visible formula section above lists the calculation path and the edge cases the page handles, so the result can be checked without relying on the form alone. Check the formula, example, and limitations on this page before using the result for a real professional & industry decision.
Can the Make or Buy Calculator be used for exact decisions?
Use it as a calculation aid, not as a substitute for checking the underlying rule, contract, policy, or professional advice that applies to your situation. When a result depends on local rules, personal details, prices, or dates, enter those values yourself and confirm them before acting.
Formula, source and verification
A relevant-cost comparison at a stated volume, with the cross-over volume where the two options cost the same.
The question it answers: At the volume we actually need, is it cheaper to make this part or to buy it?
The formula
Cost to make = (Volume × Cost to make per unit) + Avoidable fixed cost + One-off cost; Cost to buy = (Volume × (Price + Freight per unit)) + One-off cost
- V — Volume
- (count). Units required.
- cm — Cost to make per unit
- (currency). Cost that varies with each unit made.
- Fa — Avoidable fixed cost
- (currency). Optional. Fixed cost that disappears if you stop making.
- Om — One-off cost of making
- (currency). Optional. Tooling or setup.
- p — Purchase price per unit
- (currency). Supplier price.
- f — Freight and duty per unit
- (currency). Optional.
- Ob — One-off cost of buying
- (currency). Optional. Qualification or transition.
Units: Currency; counts.
What kind of calculation this is
Deterministic formula. The same inputs always give the same answer. The maths is fixed and does not depend on judgement.
Method
Only costs that change with the decision are counted. The cross-over volume is the difference in fixed and one-off costs divided by the difference in per-unit cost.
Assumptions built into the result
- Industry: Every cost, rate and standard is the figure the user entered, in the currency they chose; no exchange rate is applied.
- Mathematical: Costs and output cover the same period or the same job.
Figures this calculator will never guess for you
- No industry average, benchmark or target cost is supplied.
- No standard rate, wage or material price is assumed on the user's behalf.
- Optional components are excluded from the result when left at zero.
- No supplier price, freight rate or capacity effect is assumed.
Limitations
- Arithmetic over the figures entered — it cannot tell whether the costs, standards or allowances behind them are right.
- A target cost, an industry benchmark and the organisation's own standard are different things; only the figures entered are used.
- Cost only: quality, lead time, capacity, intellectual property and supply risk are not in the arithmetic.
- A single volume point; demand that varies should be tested at more than one volume.
Source and version
- Standard or reference
- Managerial accounting — relevant costs and make-or-buy decisions — OpenStax (Rice University) (Principles of Accounting, Volume 2: Managerial Accounting (OpenStax) — a make-or-buy comparison counts only the costs that change with the decision; costs incurred either way are irrelevant to it.)
- Published source
- Rice University — OpenStax (CC BY)
- Formula version
- Version 1
- Verification
- Reviewed against the cited source on
- How much weight the source carries
- Academic
- Applies to
- Currency
- Amounts stay in the currency you choose; no exchange rate is applied.
Cite this page
Free Calculator. (2026, September 16). Make or Buy Calculator. https://freecalculator.tech/tools/make-or-buy-calculator
"Make or Buy Calculator." Free Calculator, 16 Sept. 2026, https://freecalculator.tech/tools/make-or-buy-calculator.
Make or Buy Calculator — Free Calculator, https://freecalculator.tech/tools/make-or-buy-calculator
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