What makes a DAC so expensive?

what the market will bear - it is called capitalism!

purely cost based discussions of why things are priced the way they are miss the point unless we are talking pure commodities or perfect competition, neither of which apply in hi fi

Dac's like anything else are built to a price point. They can be as simple as the DAC in your phone. But no one will argue that their phone DAC is anywhere near as good sounding as a discrete dedicated DAC. The Bifrost2 uses Schiit's version of a R2R ladder configuration that is more costly to implement well compared to a cheaper design. It has it's own power supply etc. The BF2 should be miles ahead of what the Cambridge can do. Makes sense, you are paying for the R&D and tech that Cambridge decided not to spend.

These types of questions always puzzle me. The capitalism quote is right on. Many have found utter pleasure listening to a myriad of products that punch way above their price points. For some it may be “snob appeal”, for others they may actually hear something others do not. When it comes to certain hobbies like watches, cars, art, wine etc. seldom should price be an influencing factor. There is greatness at every level you only need to decide at what level you want to participate. In reading reviews of any product you can always find those who have in their mind found “better” (subjective), out-performing the Reference Class for much less.

There's an excellent video on YouTube that was JUST released covering this topic. Go to YouTube and look up Hans Beekhuyzen and watch his latest video "What defines the quality of a DAC."