Build vs Buy Calculator
Compare the total cost of building (making in-house) versus buying (outsourcing) a product or component. Enter your fixed and per-unit build costs, the per-unit purchase price, and the quantity needed to see which option is cheaper.
Formula
Total Build = Fixed Cost + (Build Unit Cost × Units); Total Buy = Buy Unit Cost × Units
- Building in-house carries a fixed setup cost (tooling, equipment, staff) plus a variable cost per unit.
- Buying (outsourcing) usually has no fixed cost but a higher per-unit price.
- Total build = fixed cost + build unit cost × units; total buy = buy unit cost × units.
- A positive 'Buy − Build' difference means building is cheaper at that volume.
- There's a breakeven quantity above which building's lower per-unit cost outweighs its fixed cost.
1,000 units: build vs buy
Inputs
- Build Fixed Cost: 15000
- Build Variable Cost per Unit: 12
- Buy Cost per Unit: 18
- Units Required: 1000
Build = 15,000 + 12 × 1,000 = 27,000. Buy = 18 × 1,000 = 18,000. Here buying is cheaper by 9,000 at this volume.
Frequently asked questions
How do I decide whether to build or buy?
Compare the total cost of each option at your required volume. Building wins when its lower per-unit cost makes up for its fixed setup cost.
What is the breakeven quantity?
It's the volume where build and buy cost the same. Above it, building is cheaper; below it, buying is cheaper.
Should cost be the only factor?
No. Also weigh quality control, lead time, capacity, and strategic importance — but cost is usually the starting point.
Why does building have a fixed cost?
In-house production needs upfront investment in equipment, tooling, or staff before the first unit is made.
What if volume changes?
Re-run the numbers. Higher volumes favour building because the fixed cost spreads over more units.