A prototype's unit cost is not the production unit cost
The same part can cost fifty cents or twenty dollars depending on when it is made. The story of a bracket, and why unit cost is always two numbers.
On this page
Here is a hypothetical story built from the kinds of things that happen in real projects.
The bracket
An inventor needs a sheet-metal bracket. It is a simple part with one clever feature, a formed shape that gives it a function no off-the-shelf bracket has. The inventor has done the arithmetic: at production volume, a part like this should cost around fifty cents. The business plan is built on that number. Several thousand dollars have already gone to a patent attorney to protect the clever feature.
Then the inventor asks for five hundred prototypes.
The quote comes back at roughly $10,000. That is about $20 per bracket, for a part that is supposed to cost fifty cents. The inventor's first reaction is that the firm is either incompetent or dishonest. It is neither. The quote is correct, and so is the fifty cents. They are answers to two different questions.
Where the $20 comes from
| Item | Amount |
|---|---|
| Prototype tooling for the formed feature (soft tooling, good for a few hundred parts) | about $5,000 |
| Prototype parts, cut and formed in small batches with hand finishing | over $10 per part |
| Total for 500 parts | about $10,000 |
| Effective cost per part | about $20 |
| The same 500 parts at production pricing | about $250 |
Figures are hypothetical and rounded.
The gap is not a markup. It comes from four things, each of them ordinary:
No production tooling. The fifty-cent price assumes a progressive die: a hardened steel tool that stamps and forms the bracket in one stroke, thousands of times an hour, for years. That tool might cost tens of thousands of dollars, spread over hundreds of thousands of parts. For five hundred prototypes, nobody builds it. Softer, cheaper tooling is made instead, and it still costs thousands, now spread over five hundred parts.
Setup spread over few parts. Programming the laser cutter, setting up the press brake, and making the first good part takes the same hours whether the run is five or five thousand. Those hours land on each of the five parts.
Hand work. Prototype parts are deburred, fitted, checked and finished by hand. Production parts come off the die finished.
Small-quantity material and process pricing. Sheet stock bought by the sheet costs more per part than sheet bought by the ton. A plating shop charges a lot minimum that barely notices five hundred small parts.
Everything in that list is about quantity and tooling. None of it changes what the bracket will cost once it is in production. The fifty cents still stands.
Key takeaway Unit cost is two numbers. The prototype cost says what it takes to make a few, now, without tooling. The production cost says what it takes to make many, later, with tooling. One is a development expense. The other is a cost of goods. They do not predict each other.
The sequencing mistake
The expensive part of the bracket story is not the $10,000. It is the several thousand dollars that went to the patent attorney first.
Nothing was wrong with the patent work. The problem was the order. Had the inventor learned the manufacturing picture first, the business plan, the pricing, the size of the first run, and the patent budget would all have been set with real numbers. Instead, the patent budget was set on the fifty-cent assumption alone, and the development budget had no line for the $10,000 at all.
The general rule: learn what the product costs to make before committing large sums to anything else. Patents, branding, packaging design and marketing all depend on numbers that only development produces. A patent attorney can advise on timing, and in many cases a provisional filing can hold a date while the manufacturing questions get answered. Ask one.
Two budget lines
A development budget needs a line for prototype parts and a separate line for production parts for the first run. The first is spent during Prototype and Preproduction, and it is money that produces knowledge, not inventory. The second is spent at Production, and it is money that produces goods for sale.
Most first budgets have one line, and it is usually the production number. Then the prototype invoices arrive and the plan breaks. A budget with both lines, even as rough guesses, survives contact with the first quote.
How wide the gap usually is
Ten to forty times between prototype and production unit cost is common for mechanical parts. Molded plastic parts are often at the higher end: a part that costs cents from a mold can cost tens of dollars as a machined or cast-urethane prototype. Electronics behave a little differently: a custom circuit board in prototype quantities carries setup charges but the components themselves are closer to their volume prices.
Novelty widens the gap. A part made by a standard process costs more in small quantities but follows a known curve. A part that needs a new or unusual process costs more at every quantity, and the prototype phase is where that gets discovered.
Common mistake Dividing the prototype invoice by the number of units and calling it the unit cost. It is the prototype unit cost. Dividing it again by "well, at volume it'll be cheaper" and guessing the factor is not a production cost either. The production cost comes from supplier quotes against a production-ready design, in Preproduction.
What to ask when the numbers surprise
- "Which of these costs are tooling and setup, and which are per-part?"
- "What would the per-part cost be at 10,000, with production tooling, and what would that tooling cost?"
- "Is the novel feature driving the cost, and is there a simpler way to get the same function?"
- "What would it take to find out the production cost before building five hundred of these?"
The last question is the one the bracket's owner needed. Often the answer is a few hours of a manufacturing engineer's time, which is cheaper than any of the other numbers on this page.
Try this (15 minutes) Take the single most important custom part in the product. Write down the production process that would make it at volume, and the process that would make one of it next week. If the two processes are different, there are two unit costs, and the budget needs both.