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Make Or Buy Decision Calculator

Work out make or buy decision instantly with clear inputs, formula shown and shareable results.

About Make Or Buy Decision Calculator

Make or buy turns on the break-even volume: fixed cost of making divided by the difference between the supplier price and the internal variable cost. Above that volume making is cheaper; below it, buying is — which is why the decision changes as demand changes.

Formulas

Make cost

Make = Annual fixed cost + Variable cost per unit x Volume

Break-even volume

Break-even = Fixed cost / (Supplier price - Internal variable cost)

Worked example

With the default values below, Make Or Buy Decision Calculator returns Buy cost less make cost of -$120,000.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Annual volume
48,000
Internal variable cost per unit
180
Annual fixed cost of making in-house
4,200,000
Supplier price per unit
265

Results

Buy cost less make cost
-$120,000.00
Total cost of making
$12,840,000.00
Total cost of buying
$12,720,000.00
Volume at which make and buy cost the same
49,412

Step by step

  1. 1Values used
  2. 2Make cost
  3. 3Break-even volume
  4. 4Buy cost less make cost= -120,000.00
  5. 5Total cost of making= 12,840,000.00
  6. 6Total cost of buying= 12,720,000.00
  7. 7Volume at which make and buy cost the same= 49,412

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation or tax into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Should sunk fixed costs be included?

Only if they are genuinely avoidable by outsourcing. Costs that continue regardless should be excluded, which usually favours buying.

What non-cost factors matter?

Capability retention, intellectual property, supply security, quality control and the difficulty of reversing the decision later.

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