May I know, how can I learn to know when to use (fixed & variable cost) vs. (direct & indirect cost) under the cost branch?
Thank you so much
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How to know when to use (fixed & variable cost) vs. (direct & indirect cost)?
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Hi there,
Ultimately, it depends on the case. Moreover, I personally actually don't like either..."I'd like to segment by FC and VC" and "I'd like to segment by direct and indirect costs" is just incredibly generic and adds no value!
Rather, break it down by what matters. Thematically, what major costs are here and what's a systematic approach to looking at costs.
Some helpful related Q&As:
https://www.preplounge.com/en/consulting-forum/direct-and-indirect-instead-of-fixed-and-variable-6272
https://www.preplounge.com/en/consulting-forum/inventory-costs-how-to-segment-6861
https://www.preplounge.com/en/consulting-forum/structure-breakdown-for-costs-7963
Hi there,
You may use any of the two as they are both a MECE way to structure costs. In the end, you should use the one that helps you to brainstorm more easily the costs for a particular case, as after that division you will have to identify costs for each category.
Best,
Francesco
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