Are inventory costs fixed costs or variable costs typically?
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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.
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
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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