Make or Buy: Subcontract Decision Sheet

How to read this sheet

The avoidable share of each line is a management fact and not an accounting one, and it is the only input that matters. Depreciation on a machine already bought is nil whatever the ledger says, because selling the machine is a separate decision with its own sheet; if it genuinely would be sold, enter the loss of its resale value as a line of its own rather than inflating this column. Labour is avoidable only to the extent that people are released or redeployed onto work that earns - keeping them and finding them something to do is not a saving, and entering it as one is how this sheet is made to agree with a decision already taken. Capacity released is credited only where the line was genuinely full and the freed hours will carry other work; it defaults to zero because most of the time neither is true, and crediting it otherwise is the mirror image of the absorbed-cost error. Rejection is applied to the outside price because work that comes back wrong has already been paid for, and the break-even price is the inverse of the whole calculation - the number to take into the negotiation instead of your own cost per piece. Nothing here prices the things that decide subcontracting as often as money does: control of quality, protection of a process nobody else should learn, lead time, and what happens to this arrangement when the subcontractor is full and you are not their largest customer.