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Anonymous A
on Jul 12, 2021
Global
I want to receive updates regarding this question via email.

Inventory costs- fixed or variable?

Are inventory costs fixed costs or variable costs typically?

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Ian
Coach
on Jul 13, 2021
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi there,

They are both!

The inventory management system, workers, and rent/space is generally viewed as fixed. However, the actual inventory ordered as well as any warehouse workers paid hourly would be variable.

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Francesco
Coach
on Jul 13, 2021
#1 Coach for Sessions (4.500+) | 1.500+ 5-Star Reviews | Proven Success: ➡ interviewoffers.com | Ex BCG | 10Y+ Coaching

Hi there,

I agree with Ian. According to the specific cost, it could be variable (eg transport costs related to the inventory) or fixed (eg rent for the inventory space, assuming only certain levels of capacity are present and you cannot set in between).

Best,

Francesco

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Deleted user
edited on Jul 13, 2021

For the purposes of case study interview (and unless the case prompt or interviewer suggests otherwise), consider it as variable always. Inventory is raw materials or finished goods stored in warehouse or retail channels of a business.

Reality is a bit complicated as inventory costs includes the direct cost associated with purchasing it and indirect costs such as transporation, storage, maintenance etc. All these indirect costs are fixed and many companies dont event consider them as part of inventory. But the practice varies across industries.

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