Hello everyone, I hope you all are doing good in your preparation. I am practicing case interviews seriously from last weeks, and I notice one thing again and again: whenever the case moves to the cost estimation area, I feel stuck. Market sizing, profitability tree, customer segmentation all these feel normal to me. But when interviewer asks me to break down costs, I suddenly lose confidence and I am not sure if my approach is right. Sometimes I try to categorize fixed and variable cost, sometimes I try to list components like raw materials, labor, logistics, overhead, but still I feel I don’t know how much detail they really expect. If I go too deep, I worry I am wasting time. But if I stay too general, I feel maybe I am missing points. In many sample answers, candidates make very neat structures and assumptions quickly, but for me it takes time to think. One example: recently I tried a production case where I had to estimate cost for a new manufacturing line. It remind me a bit of real technical work like structural steel cost estimation where you break everything into materials, weights, labor hours, fabrication, installation, etc. But in consulting case interviews we don’t get real numbers, so I can’t rely on exact data. Instead I must make assumptions fast, and sometimes those assumptions feel random to me. I really want to know how much detail is “normal” in a real interview. Do interviewers want us to list every small cost element, or only main drivers? Also how do you stay structured when you don’t know the industry? For example, in food industry case I have no idea about ingredients cost; in manufacturing case I don’t know machine operating cost; still I must say something logical. If anyone here improved in this part, please share your method. Do you use any framework or simple checklist for cost estimation? Something like always checking materials, machinery, labor, distribution, overhead, etc.? Or do you think from value chain perspective? I will appreciate any guidance because this part is becoming my weak area, and I want to fix it before real interviews.
Hey Chloe :)
Totally normal to feel that way. In real interviews they never expect deep technical cost breakdowns. They mainly want to see that you stay calm, pick the big cost drivers, and make clean, logical assumptions. Think in simple buckets like materials, labor, machinery, distribution, overhead. Two or three levels are enough. If you do not know the industry, just say you will focus on the drivers that typically matter most and make transparent, round assumptions. That alone already shows strong thinking.
You never need exact numbers, only a clear chain of logic. Once you practice a few times, this becomes much faster and you will stop overthinking the detail. If you want, you can message me any specific case and we can walk through it together.
best, Alessa :)
This is a perfectly normal challenge, and you’ve hit the nail on the head regarding why it feels arbitrary—it’s because we aren’t expected to bring detailed industry data to the table. In a real project, we would staff an industry expert and spend a week on this; in an interview, they are testing your ability to simplify complex realities down to the major drivers.
When facing a major investment, especially manufacturing or a new operational line, immediately draw the line between CAPEX (Capital Expenditures) and OPEX (Operating Expenses). This is the structuring distinction interviewers look for, as it shows you understand cash flow timing. For CAPEX, list out the one-time, non-recurring costs: Machinery Purchase/Installation, Facility Build-out, Initial Permitting/Legal. For OPEX, focus on recurring costs: Labor, Utilities, Raw Materials/Inventory, Maintenance, and Rent/Taxes. This structure alone will elevate your response from a simple bulleted list to a strategic breakdown.
You should always aim for the 80/20 rule: identify the two or three cost categories that will undeniably drive 80% of the total expense. In food manufacturing, that’s usually Raw Ingredients and Direct Labor. In logistics, it’s Fuel and Driver Wages. Don't waste time listing small overheads unless the case specifically centers on efficiency improvements there. The goal is to quickly create a logical structure and then state your necessary assumptions clearly. It is far better to say, "I will assume raw material costs are the largest variable input, roughly 40% of COGS, based on typical industry averages for low-margin products," than to try and pull a detailed number out of thin air.
Think of it this way: the interviewer doesn't care if your final cost estimate is $5 million or $50 million. They care that your structure covers the major levers, that you categorize fixed vs. variable, and that you clearly articulate the assumptions necessary to move forward. If you can do that, the cost estimation is a success, even if the numbers are estimates of estimates.
All the best!
Hi Chloe!
I see many candidates struggle with cost-related questions during interviews, so the first good news is that you're definitely not alone :-)
Let me help you with the overall approach and how to structure cost cases.
How to structure cost cases
1) Big picture
First, there are two main types of costs. Imagine you're buying a new BMW and need to spend $100k on it. This type of cost is called capital expenditure (capex). It’s an initial investment - make sure you consider it when calculating ROI or other investment profitability metrics. A small hint for more advanced cases: capex is a balance sheet item and is depreciated over time. For example, if a car is depreciated over five years, only $20k will hit your profit in a given year.
Second, once you’ve bought the BMW, you’ll incur ongoing operational expenses (opex), such as fuel, maintenance, repairs, and so on. These costs affect your annual profit and loss statement for that year.
2) A few layers down (opex only)
When it comes to operating costs, you have a few ways to structure your case:
a) Fixed vs. variable costs:
Fixed costs do not depend on production volume (e.g., salaries, rent, leasing fees). Variable costs are production-dependent (e.g., raw materials, energy).
b) Direct, indirect, and G&A costs:
Direct costs relate directly to production (raw materials, labor, transportation). Indirect production costs include parts of labor, materials, or transportation that cannot be directly allocated to specific products. G&A (general and administrative) covers overhead such as HR, finance, and management.
3) Don’t go deeper than that
Since you usually have only 20–30 minutes to crack a full case, I would suggest not going more granular than the structure above. Of course, you may need to adapt the categories to the context - for example, in food production, call raw materials “food costs,” and in car manufacturing, you might structure costs around functions like production, assembly, painting, etc.
One last hint: try not to list more than 3-4 different cost categories. A case is not about how many cost groups you can name, but about how logically and clearly you can structure them for the interviewer.
Structuring takes practice, so don’t worry, keep solving cases, pick cost cases for extra training, and you’ll master it before you know it.
If you’d like to practice cost cases a bit more, let me know - happy to help.
Best of luck,
Kacper
Hi Chloe,
This is a really common pain point. In interviews they care much more about whether you identify the main cost drivers and explain your logic clearly than about listing every possible cost line. A good rule of thumb is to start high level with materials, labor, fixed assets, and overhead, then go one layer deeper only where it actually matters for the decision. When you don’t know the industry, think in terms of the value chain and ask yourself what would realistically drive costs the most, then sanity check your assumptions out loud. That shows structured thinking and judgment, which is exactly what interviewers are looking for.
I see you've received some great answers already.
Generally, for a generalist role, they test you for your skills, not your knowledge. So knowing specific cost cutting levers in pharma start-ups for instance is not something they would expect you to know.
For specialist roles, however, this does become an expectations.
Make sure that you clarify your track and the expectations they have from you with your recruiter.
Best,
Cristian
