BIZOMAT MAKEOS · Money
Process Selection Break-Even Quantity
Above what quantity does the process with higher set-up cost become cheaper?
Break-even quantity between two manufacturing methods with different set-up (or tooling) and unit costs, the cost of each at a planned quantity, and the cheaper choice.
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How this tool works
Inputs, units and where to find them
| Input | Unit | Typical source |
|---|---|---|
| Process A | ||
| Set-up and tooling cost | AUD | Fixed cost of method A for the batch (set-up, programming, simple tooling). |
| Cost per unit | AUD | Variable cost per unit by method A (machine time, labour, material differences). |
| Process B | ||
| Set-up and tooling cost | AUD | Fixed cost of method B (often higher for dedicated tooling or programming). |
| Cost per unit | AUD | Variable cost per unit by method B. |
| Order | ||
| Planned quantity | units | Quantity to be made (including expected repeat orders if tooling is kept). |
What each input means
Open an input to see what it is, its units, the worked example and the common mistakes, with a small diagram.
Process A
What this means: Set-up and tooling cost
- What it is
- The one-off cost of getting method A ready for the batch: set-up, programming and any tooling made for the job.
- Units and format
- Enter a number in AUD: Australian dollars. The form accepts 0 AUD or more. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 300 AUD as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- A higher set-up cost for A moves the break-even quantity.
- Get it right
- Include only costs that recur with each batch or are bought for this job; shared equipment is not set-up cost.
What this means: Cost per unit
- What it is
- The cost to make each unit by method A: machine time, labour and material differences.
- Units and format
- Enter a number in AUD: Australian dollars. The form accepts 0 AUD to 10000000 AUD. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 12 AUD as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Get it right
- Use the same cost basis for both methods, for example both including overhead.
Process B
What this means: Set-up and tooling cost
- What it is
- The one-off cost of getting method B ready for the batch: set-up, programming and any dedicated tooling.
- Units and format
- Enter a number in AUD: Australian dollars. The form accepts 0 AUD or more. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 2500 AUD as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Get it right
- Use the same cost basis as method A so the comparison is fair.
What this means: Cost per unit
- What it is
- The cost to make each unit by method B: machine time, labour and material differences.
- Units and format
- Enter a number in AUD: Australian dollars. The form accepts 0 AUD to 10000000 AUD. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 4 AUD as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Get it right
- If both unit costs are equal there is no break-even quantity.
Order
What this means: Planned quantity
- What it is
- The number of units you plan to make, used to compare the total cost of each method.
- Units and format
- Enter a number in units: a count of units. The form accepts 1 units or more. Use a whole number. Required: the tool does not calculate until every input is valid.
- Example
- The form opens with 200 units as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
- Effect on the result
- Above the break-even quantity, the method with the lower unit cost becomes cheaper.
- Get it right
- Include expected repeat orders if the tooling or programme will be kept for them.
Method and formulas
- Total cost = set-up + unit cost × quantity.
- Break-even quantity = (set-up B − set-up A) ÷ (unit cost A − unit cost B).
- Below break-even the lower set-up cost wins; above it the lower unit cost wins.
- Example: the default methods break even at 275 units; at 200 units process A is cheaper.
Limitations
- Linear costs; learning, capacity limits and quality differences are not included.
- Unit costs must be on the same basis (direct cost or full cost) for both methods.
- Example values are illustrations. Replace them with values for your actual task.
Typical uses
- Choose between manual and CNC, or laser and punch, for a batch
- Decide when dedicated tooling pays
- Explain quantity effects on quotes
Who it is for
- Manufacturing engineers
- Estimators
- Production managers
What you get
- Break-even quantity
- Total and unit cost of each at the planned quantity
- Cheaper process
Interpreting the result
- Near the break-even quantity, choose on lead time, capacity or quality instead of cost.
References
- Machinery’s Handbook, 29th edition (Industrial Press, 2012), printed pp. 143–146. Topic reference; no source tables or recommended settings are reproduced.
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