Operating cost examples

What are some examples of operating costs? What is included in operating expenses? Care must be taken to avoid counting any cost twice.

If so, the following costs are also examples of operating expenses: Freight in and freight out Direct materials Direct labor Rent of production facilities Compensation for production personnel Benefits for production personnel Depreciation of production equipment and facilities Repair of production. Thus, his monthly operating cost is $ 100.

His annual total revenues. The following are common examples of operational costs. Business Service Fees. Common examples are cost of goods sold and labor costs. Generally, monthly bills are payable for them.

See full list on wallstreetmojo. The staff can travel to meet customers, for some supplies or any other event.

In such a case either company pays staff expense directly or reimburses the staff after their visit. For example, pen, papers, clippers etc. The expenses which are related to payment of utility bills of the company like expenses of water and electricity that generally are used for the daily operating activities are the utility expenses and are charged to the profit and loss account of the company. The property tax paid by the company on its properties forms the part of the operating expenses of the company.

The fees charged by the banks for the general transactions going in the business are known as the bank charges. The Repair and maintenance operating expense on the asset used for production like repairing requirements of machines, or the vehicles in the company. The expenses which are incurred for taking insurance of health care, general insurance of staff and fire insurance are to be charged to the profit and loss account under the head insurance expenses. The same however does not include the trade discount which the company gives to its customers.

This type of operating expenses which are incurred for research of the new products are treated as revenue expenses and should not be capitalized. The entertainment expenses incurred for the sales and related support activities forms the part of the operating expenses of the company. Cost of the Goods Sold is the Costs which are incurred for the Goods or products sold by the organization during a specific time period. This operating expenses that are incurred for the purpose of increasing sales are part of the sales expenses. The cost which is considered while calculating the cost of goods sold refers to the cost which is directly attributable to goods or products sold by the company.

Freight-in is the shipping cost which buyer has to pay for purchasing the merchandise when terms are the FOB shipping point. The expense related to freight-in is considered as part of the cost of merchandise and in case if the merchandise is not yet sold then the same should be considered in the inventory.

Freight out is the cost of transportation which is associated with the delivery of the goods from the place of the supplier to customers and the same should be included within cost of the goods sold classification in the income statement. Rental Cost which is paid for the properties used for providing the support related to the production. The Salaries, wages, and other benefits are given to the staff related to the production of goods. The reduction in the value of the asset due to wear and tear while using at the time of production is the depreciation expense and forms the part of the cost of goods sold.

You may learn more about accounting from the following articles- 1. Difference Between Actual Cash Value vs Replacement Cost 2. Industry Examples of Cost Product 4. Meaning of Product Cost 5. More specifically, operating costs are costs associated with revenue-generating activities. We calculate operating cost as $52. You have several expenses that may change from week to week or month to month. Examples include production wages, raw materials and shipping costs. Sales and Marketing expenses.

This is all we have for you today about. Expenses Related to Offices. The costs of communication services may vary monthly, depending on the amount of usage, while some communication systems carry fixed rates. This ratio gives you a direct comparison of your expenses to your income, allowing you to track your efficiency.

See the cost -volume-profit analysis for more information. Some costs will be both startup and operating costs. The counterpart of operating expense is capital expenditure, which is the cost of developing or improving the system in which a company performs its operational activities. Purchasing machinery, for example, is considered a capital expenditure. On the contrary, repair and maintenance of the machinery is considered an operating expense.

These are expenses you incur even.