Rahul M

Make-or-Buy Analysis

Compare the relevant cost of manufacturing internally with the cost of purchasing from an external supplier. Enter your own figures to identify the lower-cost option and calculate the break-even volume.

1. Analysis Details


Enter the quantity required for the analysis period.

2. Make Internally


Relevant fixed costs for the period.


Materials, direct labour and variable overhead.


Other variable costs not included above.

3. Buy from Supplier




Fixed supplier setup or contract costs.


Enter 0 if no transition cost applies.

Calculate Make-or-Buy
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Example Reference

These sample figures explain how the calculator works. They are for reference only and are not entered automatically into the fields above.

Required Quantity
10,000 units

Make Fixed Cost
₹2,00,000

Make Variable Cost per Unit
₹70

Buy Variable Cost per Unit
₹90

Assume fixed purchasing costs of ₹20,000 and a one-time transition cost of ₹30,000.
Total make cost = ₹2,00,000 + (10,000 × ₹70) = ₹9,00,000.
Total buy cost = ₹20,000 + ₹30,000 + (10,000 × ₹90) = ₹9,50,000.
Making saves ₹50,000 at 10,000 units. The break-even volume is
(₹2,00,000 − ₹50,000) ÷ (₹90 − ₹70) = 7,500 units.

Assumptions: Costs relate to the same analysis period and comparable product specifications. Exclude unavoidable costs that do not change between alternatives, and include relevant opportunity costs where applicable. Use the recommendation as a cost comparison, not as the sole basis for the business decision.