This paper presents results obtained from a study of cost structure and cost estimation for applying the rapid prototyping technology in the process of developing new products. The laser-based rapid prototyping technology is creating a unique platform for the production of physical models using the solid free form fabrication technology. However, the high initial equipment investment calls for a careful balance between economic gains and losses. In this study a cost hierarchical structure is proposed using a combined industrial and engineering approach, which decomposes the process of rapid prototyping into four stages: 3D solid modeling, data preparation for free-form fabrication, part building, and quality inspection. A case study utilizing the stereolithography process to build physical prototypes for constructing 3D tactile graphics, is presented to demonstrate the cost structure and to justify the economical feasibility of using rapid prototyping in the process of developing new products.