Cost analysis

cost structure
Recent activity on Apr 14, 2019
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Anonymous A asked on Apr 14, 2019

Hi all,

I am wondering for the COST structure, under what circumstance we use "Fix cost + Variable cost", and what circumstance "Capex + Opex" ?

Thanks !!

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Sidi
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updated an answer on Apr 14, 2019
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 300+ candidates secure MBB offers

You have to look at both! Depending on the context, most strategic problems require investments (Capex) which need to be recouped by operational profits (Revenue - Opex). The Operational Costs (Opex) then can be disaggregated either by fixed & variable costs, or along the value chain, or both (like a matrix). What makes sense in the particular situation is mainly governed by the kind of data available.

Cheers, Sidi

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Vlad
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Content Creator
replied on Apr 14, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

It depends on whether you are having investments in your case. In real life, most of the businesses have some Capex. Cases are usually simplified and you'll have fixed and variable costs unless the case assumes the investments. Then you should look at capex and opex (fix+var)

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Sidi

McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 300+ candidates secure MBB offers
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