Operating expenses are the costs associated with running a business on a day-to-day basis. This can include everything from rent and utilities to salaries and marketing. Operating expenses are important to track because they can have a major impact on profitability.
Operating expenses are typically divided into two categories: variable and fixed. Variable costs change based on production volume, while fixed costs remain the same regardless of how much is produced.
Some common examples of variable operating expenses include:
– Raw materials
– Direct labor
– Shipping and handling
– Sales commissions
– Advertising
Fixed operating expenses, on the other hand, tend to be more predictable and include items such as:
– Rent or mortgage payments
– Depreciation
– Interest payments
– Wages for salaried employees
It’s important to keep a close eye on both types of operating expenses, as they can have a major impact on the bottom line. For example, if a company is trying to increase profitability, one way to do this would be to reduce fixed costs.