Fixed costs and Variable costs play a crucial role in the MECE framework when calculating company profits. In the formula Profits = Revenue - Costs, Costs is broken down into Fixed costs and Variable costs. Fixed costs are expenses that do not change with the level of output, like rent or salaries. Variable costs, on the other hand, change with the level of output, like raw materials or direct labor costs. This breakdown is MECE as it ensures all costs are accounted for and none are double-counted.
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