ModeldrillFixed and variable operating costs
A financial modeling exercise from Modeldrill. Solve it with a live spreadsheet grid in your browser, with Fill right and Fill down, and it is checked the moment you submit.
The task
Operating expenses have a fixed part that rises with inflation and a variable part tied to revenue. Fill row 9: fixed costs grown by inflation for the number of years in row 7, plus the variable share of revenue.
What this exercise teaches
Splitting costs into fixed and variable parts is what lets a model show operating leverage: revenue can grow faster than costs because only part of the cost base follows it.
A hint if you get stuck
Fixed part: $B$2*(1+$B$4)^B7. Variable part: $B$3*B8. Add them. Only the row 7 and row 8 references should move.
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