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What are the typical cost drivers?

Anonym A fragte am 16. Apr 2019

Hello everybody, I heard feedback from a Case Partner that I should name cost drivers faster. So my thinking here is the following: there are fixed and variable cost, and the main drivers for fixed and variable are:

Fixed costs:

  • Rent / Lease / Property / Production site
  • Possible depreciation
  • Administration

Variable costs:

  • Personnel
  • Energy/ Water
  • Unit costs/ material

Now my two questions:

1) Are these the most important cost blocks or have I overlooked something important here? I am interested in an overview of the possible cost sources, which can then be adapted to specific cases.

2) Where would you also assign the terms production costs, operating costs and investment costs to fixed and variable areas?

Thanks a lot!

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Serhat antwortete am 20. Apr 2019
BCG | Kellogg MBA |82% Success Rate| 350+ coachees | 5+ year consulting | 30+ projects in ~10 countries
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bearbeitete seine Antwort am 16. Apr 2019
McKinsey Engagement Manager & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 90+ candidates secure MBB offers
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Alright, so let's try to bring some order into this. :)

You first have to understand that there are different ways to classify costs. These can then be layered on top of each other using a matrix or similar if this is considered sensible.

At the highest level, there are

  • Operational costs
  • Costs of capital (usually interest payments)
  • Investments

You are mostly talking about Operational Costs. Depending on the criterion used, there are at least 4 possible categories for subdivision:

  • Contingent on the behavior of costs in the event of fluctuations in production, there are
    • Fixed Costs
    • Variable Costs
  • Depending on the type of production factors consumed, a distinction is made between
    • Personnel costs
    • Operating costs
    • Material costs
  • According to the functional area in the value chain, there are
    • Procurement costs
    • Warehousing/storage costs
    • Manufacturing costs
    • Administrative expenses
    • Direct sales & distribution expenses
    • Aftersales expenses
    • Other costs (such as marketing)
  • Depending on how costs are attributed to the products or services, a distinction can be made between
    • Direct costs
    • Overhead

A couple of important points:

  • Production costs usually cover all costs that can be attributed to the production of produced goods (but interestingly, they are not always direct costs, since material overheads and production overheads can also be included!). This would include the three cost types procurement costs, storage costs and manufacturing costs in the breakdown by functional areas (as mentioned, if directly attributable to the product).
  • Overhead costs and are usually fixed.
  • Investments are not operational costs and should therefore be separated from the above consideration

    Cheers, Sidi


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