# Should-cost modelling: what a part should cost, step by step > How to build a should-cost model for a manufactured part: material, machine time, labour, setup, overhead, profit and tooling, with a worked moulding example. Source: https://sourcesquid.co/intelligence/should-cost-modelling-guide/ [Costing](https://sourcesquid.co/intelligence/?cat=costing)6 min readUpdated 28 September 2026 # Should-cost modelling: how to work out what a part should cost A should-cost model estimates what a part ought to cost to make by adding up material, machine time, labour, setup, overhead and a fair profit, using the factory's real process. It turns price negotiation from haggling into a line-by-line discussion: when a quote is higher than the model, you can see which assumption, such as weight, cycle time or scrap, explains the gap. **Anirudh** Founder and Director, SourceSquid · 15 years sourcing in India and China On this page 1. What a should-cost model is, and what it is not 2. The building blocks 3. Get material right first 4. Machine time: rate ÷ output 5. Worked example: a polypropylene container 6. The same method for other processes 7. Use the model to negotiate well 8. From should-cost to landed cost Free · 48 hours Send us your part or product. We return costs, clusters and risks. [Get a free teardown](https://sourcesquid.co/start/?from=guide-should-cost) ## Key takeaways * Model the process the factory will actually use: the right machine, cycle time and yield. * Material is usually the biggest line. Get the gross weight, scrap and grade right first. * Machine cost per part = machine hour rate ÷ good parts per hour. Cycle time and cavities drive it. * Keep tooling separate. Amortising it into the price hides it and muddies ownership. * Use the model to ask better questions, not to demand the model's number. On this page8 sections 1. What a should-cost model is, and what it is not 2. The building blocks 3. Get material right first 4. Machine time: rate ÷ output 5. Worked example: a polypropylene container 6. The same method for other processes 7. Use the model to negotiate well 8. From should-cost to landed cost ## What a should-cost model is, and what it is not A should-cost model builds the price of a part from the bottom up. It asks: if a capable factory made this part on the right equipment, what would each step cost? It is not a demand. Factories have real costs your model will miss: an old machine, a small batch, a difficult customer on the next line. The value of the model is that it lets you have a specific conversation. “Your quote is 18% above our estimate; our cycle time assumption is 28 seconds, what is yours?” gets a better answer than “your price is too high”. ## The building blocks Every discrete manufactured part follows the same structure: Cost element | How to calculate it | What drives it ---|---|--- Material | Gross weight × material price × (1 + scrap %) | Part weight, runners and offcuts, grade, yield Machine | Machine hour rate ÷ good parts per hour | Cycle time, cavities or parts per cycle, OEE Direct labour | Labour rate per hour ÷ good parts per hour | Operators per machine, manual steps Setup | (Setup hours × rate) ÷ batch size | Changeover time, batch size Secondary operations | Same logic per step | Machining, finishing, assembly Packaging | Carton and inner pack share per part | Pack specification Overhead and SG&A | % of the above, or a loaded machine rate | Factory size, country Profit | % of total cost | Market, relationship, volume Tooling | Separate, or amortised over an agreed quantity | Tool steel, cavities, complexity The free [should-cost calculator](https://sourcesquid.co/tools/should-cost/) follows this structure, and the [BOM builder](https://sourcesquid.co/tools/bom-builder/) rolls up assemblies with bought-in parts. ## Get material right first Material is usually the largest line for moulded, cast and forged parts, and the easiest to get wrong. Three questions: 1. **What is the gross weight?** The net part weight plus runners, sprues, flash, risers or bar-end offcuts. For a casting, gross melt weight can be well above the finished weight. 2. **What happens to the waste?** Runners may be reground, and foundry returns are remelted, but with a loss. Credit only what really goes back into the process. 3. **Which grade?** A quote on a cheaper grade looks attractive until the part fails. Name the grade and ask for mill certificates. Use a current price for the grade in the supplier’s country, and note the date. Commodity prices move, so agree how material price changes flow into the part price, for example quarterly against a published index. ## Machine time: rate ÷ output Machine cost per part is the machine hour rate divided by good parts per hour. The hour rate covers depreciation, power, maintenance and floor space. Output depends on: * **Cycle time.** For moulding and die casting, the time from mould close to mould close. Wall thickness and cooling dominate. * **Parts per cycle.** A four-cavity mould makes four parts per cycle. * **OEE (overall equipment effectiveness).** Real output after downtime, speed losses and rejects. Few job shops sustain much above 85%. Small changes here move the price a lot. Halving the cycle time halves the machine cost per part. That is why the cycle time is the first number to agree with the factory. ## Worked example: a polypropylene container An 85 g polypropylene storage container, moulded in a 2-cavity cold-runner mould (15 g runner per shot), 20,000 parts per batch, 100,000 a year. All rates are illustrative assumptions for the example, not market quotes. **Assumptions.** PP at $1.40/kg; masterbatch 2% at $4.00/kg; process scrap 2%. 250-tonne press at $20.00 per hour; cycle 28 seconds; OEE 85%. One operator for two presses at $2.60 per hour. Setup 3 hours. Packaging $0.018 per part. Overhead and SG&A 12%; profit 10%. Line | Working | Per part ---|---|--- Material | (85 g + 7.5 g runner) × 1.02 × $1.40/kg | $0.1321 Masterbatch | 92.5 g × 2% × $4.00/kg | $0.0074 Machine | $20.00 ÷ 218.6 good parts/h | $0.0915 Labour | $1.30 ÷ 218.6 | $0.0059 Setup | 3 h × $22.60 ÷ 20,000 | $0.0034 Packaging | Carton and polybag share | $0.0180 **Subtotal** | | **$0.2583** Overhead and SG&A | 12% | $0.0310 Profit | 10% of cost | $0.0289 **Should-cost, ex-works** | | **$0.3183** Tooling, if amortised | $9,000 ÷ 100,000 parts | $0.0900 **Should-cost with tooling amortised** | | **$0.4083** Good parts per hour: 3,600 ÷ 28 × 2 cavities × 85% = 218.6. **Using it.** The supplier quotes $0.46 including tooling. The model is $0.05 lower. The buyer asks two questions: what cycle time and part weight is the quote based on? The answer is a 34-second cycle, because the mould has no conformal cooling. At 34 seconds, the machine line rises to $0.111, which explains about $0.02 of the gap. The rest is negotiated, and the buyer agrees to pay for tooling up front, which removes $0.09 from the price and puts the mould in the buyer’s name. ## The same method for other processes The structure stays the same across processes; only the drivers change. Process | Material driver | Time driver | Watch for ---|---|---|--- Pressure die casting | Shot weight, runner and overflow returns, melt loss | Cycle time, cavities | Trimming, machining, impregnation, finishing Investment casting | Pour weight including gating | Parts per tree, shell and pour cycle | Heat treatment, fettling, machining CNC machining | Bar or blank weight, including chips and offcuts | Cycle time per operation, setups | Tool wear, inspection time Sheet metal | Blank size and nesting yield | Punch or laser time, bends | Welding, finishing, hardware insertion Cut-and-sew | Fabric consumption per garment, marker efficiency | Standard allowed minutes (SAM) × line cost per minute | Trims, washing, printing Where do the inputs come from? Weights from the CAD model or by weighing a sample, cycle times from similar parts or a mould-flow study, machine and labour rates from supplier cost breakdowns you have collected, and material prices from local distributors. Record the source and date of every input: the model is only as current as its oldest number. ## Use the model to negotiate well * **Share the structure, not always the numbers.** Ask the factory for a cost breakdown in the same format as your model, so you compare line by line. * **Separate one-off from recurring cost.** Tooling, fixtures and first-article inspection are one-off. Keep them out of the unit price where you can. * **Look at MOQ and batch size.** Setup cost falls with batch size. The [MOQ vs price calculator](https://sourcesquid.co/tools/moq-vs-price/) shows where larger orders stop paying off. * **Compare several quotes on the same basis.** The [quote comparison tool](https://sourcesquid.co/tools/quote-compare/) normalises Incoterms, tooling and payment terms. * **Include design questions.** A thinner wall, a different grade or one fewer machining operation often saves more than any negotiation. The [teardown cost calculator](https://sourcesquid.co/tools/teardown-cost/) helps you test those ideas. ## From should-cost to landed cost Ex-works should-cost is only the factory gate. To decide between suppliers or countries, add freight, insurance, duty, fees and inspection to get the landed cost per unit. The [landed cost guide](https://sourcesquid.co/intelligence/landed-cost-guide/) walks through that step, and the [make or buy calculator](https://sourcesquid.co/tools/make-or-buy/) compares buying with making in-house. ## Free tools for this guide * [Cost**Should-cost calculator**](https://sourcesquid.co/tools/should-cost/) * [ Cost**Teardown cost calculator**](https://sourcesquid.co/tools/teardown-cost/) * [ Planning**BOM builder**](https://sourcesquid.co/tools/bom-builder/) * [ Cost**Make or buy calculator**](https://sourcesquid.co/tools/make-or-buy/) * [ Cost**MOQ vs price break calculator**](https://sourcesquid.co/tools/moq-vs-price/) * [ Cost**Supplier quote comparison tool**](https://sourcesquid.co/tools/quote-compare/) ## In the India Sourcing Atlas [Plastics and rubber moulding](https://sourcesquid.co/india-atlas/processes/plastics-and-rubber-moulding/)[Injection-moulded plastic parts](https://sourcesquid.co/india-atlas/products/injection-moulded-plastic-parts/)[Polypropylene and polyethylene](https://sourcesquid.co/india-atlas/materials/polypropylene-polyethylene/) Written by [Anirudh](https://sourcesquid.co/principals/) 15 years in sourcing, vendor development and quality across India and China. MBA in Operations and Supply Chain Management and Lean Six Sigma Black Belt. Founder of SourceSquid, with offices in Bengaluru and Ningbo. Should-cost modelling: questions ## Straight answers. Anything else, ask us directly. A principal replies, not a bot. [anirudh@sourcesquid.co](mailto:anirudh@sourcesquid.co) ### What is a should-cost model? A should-cost model is a bottom-up estimate of what a part should cost to make, built from material, machine time, labour, setup, overhead, profit and tooling, using the process a capable factory would use. Buyers use it to judge quotes and to negotiate on facts. ### How accurate is a should-cost model? A careful model built on the real process is usually close enough to show which quote is out of line and why. Its accuracy depends mostly on getting material weight, cycle time and machine rate right, so check those three with the factory. ### What is the difference between should-cost and target cost? Should-cost is what a part ought to cost to make. Target cost is what you can afford to pay, worked back from your selling price and margin. When should-cost is above target cost, you change the design, the process or the volume, not just the supplier. ### Should tooling be included in the part price? It is clearer to pay for tooling separately and own it. If tooling is amortised into the part price, agree the quantity it is spread over, what happens to the price once it is paid off, and who owns the tool. ### What overhead and profit percentages are reasonable? They vary by country, factory size and process. Rather than argue a percentage, compare the factory's total conversion cost per part with your model and ask what explains the difference. ## Keep reading [All guides](https://sourcesquid.co/intelligence/) * [Costing · 7 min**Landed cost: how to calculate what an import really costs** How to calculate landed cost per unit: EU and UK duty on CIF value, US duty on transaction value, FY2026 MPF and HMF, import VAT and a worked example.](https://sourcesquid.co/intelligence/landed-cost-guide/) * [Sourcing · 7 min**Tooling and mould ownership: how to protect the tools you pay for** How to own and control moulds, dies and fixtures made by suppliers in India and China: tooling agreements, payment, marking, shot life and safe transfer.](https://sourcesquid.co/intelligence/tooling-and-mould-ownership/) * [Sourcing · 7 min**How to find manufacturers in India: a six-step method that works** How to find and vet manufacturers in India: start from the process, pick the right cluster, check GST and IEC records, run an RFQ, audit, and approve samples.](https://sourcesquid.co/intelligence/how-to-find-manufacturers-in-india/) Free sourcing teardown ## A should-cost for your part, free in 48 hours. Send a drawing, a sample photo or a current quote. We return a line-by-line should-cost and the questions to ask your supplier. [Get a free teardown in 48 hours](https://sourcesquid.co/start/?from=guide-should-cost)[Talk to a principal](https://sourcesquid.co/contact/)