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Precision manufacturing machinery and components, illustrating product sourcing

Should-cost model template

An Excel model that estimates what a product should cost, to compare against the supplier's price.

A should-cost model estimates what a product ought to cost to make, by adding up materials, labour, machine time, overheads, packaging, freight and a reasonable margin. Comparing it with the supplier's quote shows where the price may be too high.

This template is built for manufactured goods and components. It is not meant to be perfect; it gives you a fact-based starting point for a negotiation instead of simply asking for a discount.

Free to download. Available as Excel.

What's included

  • Bill of materials with quantities and prices
  • Labour time and rate
  • Machine time and rate
  • Overhead and scrap allowances
  • Packaging and freight
  • Margin and comparison with the quoted price

How to use this template

  1. Gather drawings, specifications and the supplier's quote.
  2. List each material with its weight or quantity and market price.
  3. Estimate labour and machine time for each process.
  4. Add overheads, scrap, packaging, freight and margin.
  5. Compare the total with the quote and list questions for the supplier.

Frequently asked questions

It is an estimate. Its value is in showing which cost elements look out of line, so you can ask the supplier specific questions.

Published commodity indices, supplier price lists and previous quotes are common sources. Note the date and source of each price.

Some will, especially in long-term relationships. Asking for a breakdown against your own model often leads to a more open discussion.

Need help putting this into practice?

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Last updated 22 October 2026