ToolsUnit cost
Free tool · unit economics
Unit cost & NRE model
What each unit really costs at your volume, what tooling and engineering add on top, your margin in DTC and in retail, and the volume where it all pays back. Live as you type.
- all-in
- landed
- DTC net revenue
- retail net revenue
| Units | Landed | All-in |
|---|
Cost stack at this volume
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How this is calculated
- BOM at volume = quoted BOM × (volume ÷ quote volume)log₂(1 − drop). A learning curve standing in for price breaks [1]; it stops at 100k units.
- Factory cost = (BOM + labour) ÷ yield + packaging. Scrap consumes parts and labour; packaging goes on after test.
- Landed = factory cost × (1 + CM markup) × (1 + freight & duties).
- One-time per unit = (NRE + tooling + certification) ÷ volume. All-in = landed + one-time per unit.
- Net revenue: DTC = MSRP × (1 − payment % − returns %) − per-order fee − fulfilment. Retail = MSRP × (1 − retailer) × (1 − distributor) × (1 − allowances).
- Gross margin = (net revenue − landed) ÷ net revenue. Status: healthy ≥ 50% [8], thin 30–50%, risk below 30%. MSRP ÷ landed: healthy ≥ 4×, thin 3–4×, risk below 3× [9].
- Break-even = the smallest volume where volume × (net revenue − landed) covers the one-time costs: where the all-in curve crosses the revenue line on the chart.
- Knee = the volume past which one-time costs add less than 10% to the landed cost.
How srvo helps
Turn this estimate into a cost model you can build to.
We take physical products from prototype to production: DFM reviews that take cost out before tooling is cut, contract-manufacturer quotes at your real volume, test fixtures that raise yield, and certification plans sized to the product.
For a geotechnical client we turned an off-the-shelf drill into a precision soil sampler and delivered ten units with an assembly manual: a small batch, built to be repeated.
FAQ
Questions founders ask
What is the difference between landed cost and all-in cost?+
Landed cost is what one finished unit costs once it is in your warehouse: parts, labour, scrap, packaging, the contract manufacturer’s markup, freight and duty. All-in cost adds your one-time costs (engineering, tooling, certification) spread over the units you build.
Gross margin is normally quoted on landed cost. All-in cost tells you whether this production run pays back what it took to get here.
What gross margin should a hardware product have?+
A common founder rule of thumb is at least 50% gross margin on device sales; below that, the price is probably too low to fund marketing, returns and the next product [8]. For retail, plan a shelf price of at least 3× your landed cost; some of the most successful consumer hardware runs 4–5× [9].
The retailer’s cut comes out of that multiple. Retailers commonly keep 30–40% of the shelf price [6], and keystone pricing is 50% [7].
Why does unit cost fall so fast with volume, then flatten?+
Two effects. One-time costs divide by volume: $150,000 of engineering, tooling and certification is $1,500 a unit at 100 units and $15 at 10,000. And parts get cheaper in quantity, which this model approximates with a learning curve you can edit [1].
Past the knee marked on the chart, one-time costs add less than 10% to each unit; more volume then mostly buys cheaper parts, not cheaper tooling.
How accurate is this?+
It is an estimate for decisions, not a quote. The structure is standard and every assumption is visible; the defaults describe a plausible connected consumer device. Duty in particular depends on your HTS classification and country of origin, and only CBP can rule on it [4].
Replace each default with a real quote as you get one. The link in your address bar keeps your numbers, so you can come back or share it.
How do I bring my unit cost down?+
In rough order of leverage: design for manufacture before you cut tooling (fewer parts, fewer operations, standard fasteners), qualify second sources for expensive components, get open-book quotes from two or three contract manufacturers at your real volume, raise first-pass yield with proper test fixtures, and use pre-certified radio modules to shrink certification.
That is the work srvo does between prototype and production. See services.
Sources & assumptions
Defaults are starting points drawn from these sources, not quotes for your product. Every number above is editable; replace them with your own quotes as soon as you have them.
- NASA Cost Estimating Handbook (2002), §7.6 learning-curve rules of thumb — reproduced in a NASA GSFC PRICE H briefing — purchased parts 85–88%, electronics manufacturing 90–95%, raw materials 93–96% per doubling of quantity (p. 10). Our 8% BOM drop per doubling = a 92% curve.
- Formlabs — How to estimate injection molding cost — aluminum molds for ~1,000–5,000 parts $2,000–5,000; molds for 10,000+ runs $5,000–100,000; complex multi-cavity steel $100,000+.
- SparkFun — Getting a module FCC certified — an itemized quote for a Bluetooth module: FCC Part 15C ~$4,000, ISED ~$3,600 incl. fee, CE RED + LVD ~$4,600; ~$12,200 total. Quotes vary widely with radios and markets.
- USITC — Harmonized Tariff Schedule (hts.usitc.gov) and classification FAQ — classification starts in the HTS; only U.S. Customs and Border Protection can issue a binding ruling. Anti-dumping and other special duties are not in the HTS.
- Stripe — pricing (United States) — standard online card rate 2.9% + 30¢; international cards and currency conversion add more.
- Charlie Kindel — Retail pricing, markup and margins (2012) — consumer-electronics retailers “as a rule of thumb, generally extract a 30–40% markup”.
- eightx — What is keystone markup? — keystone = pricing at 2× cost: a 100% markup on cost and a 50% gross margin.
- Adafruit Learn — How to build a hardware startup: pricing your product (Marc Barros) — “If your gross margin is less than 50% your price is too low.”
- Sinovation Ventures — Consumer IoT start-up advice: what margins does your hardware need? — “the SRP should be at least 3X COGS”; “some of the most successful consumer hardware products have a 4X or 5X SRP to COGS ratio.”