Operating Costs Can Be Described as the Expenses Which Are Related to the Operation of a Business

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    Operating costs can be described as theexpenseswhich are related to the operation of a

    business, or to the operation of a device, component, piece of equipment or facility.

    [edit] Business operating costs

    For a commercial enterprise, operating costs fall into two broad categories:

    fixed costs, which are the same whether the operation is closed or running at 100%capacity

    variable costs, which may increase depending on whether more production is done, andhow it is done (producing 100 items of product might require 10 days of normal time or

    take 7 days if overtime is used. It may be more or less expensive to use overtime

    production depending on whether faster production means the product can be more

    profitable).

    [edit] Business overhead costs

    Overhead costs for a business are the cost ofresourcesused by anorganizationjust to maintain

    its existence. Overhead costs are usually measured in monetary terms, but non-monetary

    overhead is possible in the form of time required to accomplish tasks.

    Examples of overhead costs include:

    payment of rent on the office space a business occupies cost of electricity for the office lights some office personnel wages

    Non-overhead costs are incremental costs, such as the cost of raw materials used in the goods abusiness sells.

    Operating Cost is calculated by Cost of goods sold + Operating Expenses. Operating Expenses

    consist of : . Administrative and office expenses like rent, salaries, to staff, insurance, directors

    fees etc. . Selling and distribution expenses like advertisement, salaries of salesmen. . Admin

    Cost will include to Sm

    [edit] Equipment operating costs

    In the case of a device, component, piece of equipment or facility (for the rest of this article, all

    of these items will be referred to in general as equipment), it is the regular, usual and customary

    recurring costs of operating the equipment. This does not include thecapital costof constructing

    or purchasing the equipment (depending on whether it is made by the owner or was purchased as

    a constructed system).

    Operating costs are incurred by all equipmentunless the equipment has no cost to operate,

    requires no personnel or space and never wears out (any examples? perhaps intangibles, though

    not equpiment, per se). In some cases, equipment may appear to have low or no operating cost

    http://en.wikipedia.org/wiki/Expensehttp://en.wikipedia.org/wiki/Expensehttp://en.wikipedia.org/wiki/Expensehttp://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=1http://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=1http://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=1http://en.wikipedia.org/wiki/Fixed_costshttp://en.wikipedia.org/wiki/Fixed_costshttp://en.wikipedia.org/wiki/Variable_costshttp://en.wikipedia.org/wiki/Variable_costshttp://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=2http://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=2http://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=2http://en.wikipedia.org/wiki/Resource_%28project_management%29http://en.wikipedia.org/wiki/Resource_%28project_management%29http://en.wikipedia.org/wiki/Resource_%28project_management%29http://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=3http://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=3http://en.wikipedia.org/wiki/Capital_costhttp://en.wikipedia.org/wiki/Capital_costhttp://en.wikipedia.org/wiki/Capital_costhttp://en.wikipedia.org/wiki/Capital_costhttp://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=3http://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Resource_%28project_management%29http://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=2http://en.wikipedia.org/wiki/Variable_costshttp://en.wikipedia.org/wiki/Fixed_costshttp://en.wikipedia.org/w/index.php?title=Operating_cost&action=edit&section=1http://en.wikipedia.org/wiki/Expense

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    because either the cost is not recognized or is being absorbed in whole or part by the cost of

    something else.

    Equipment operating costs may include:

    SalariesorWagesof personnel

    Advertising Raw materials License or equivalent fees (such as Corporation yearly registration fees) imposed by a

    government

    Real estate expenses, includingo RentorLeasepaymentso Office space rento furniture and equipmento investment value of the funds used to purchase the land, if it is owned instead of

    rented or leased

    oproperty taxes and equivalent assessments

    o Operations taxes, such as fees assessed on transportation carriers for use ofhighways

    Fuel costs such as power for operations, fuel for production Public Utilities such as telephone service,Internetconnectivity, etc. Maintenance of equipment Office supplies and consumables Insurance premium Depreciation of equipment and eventual replacement costs (unless the facility has no

    moving parts it probably will wear out eventually)

    Damage due to uninsured losses,accident,sabotage,negligence,terrorismand routinewear and tear.

    Taxes on production or operation (such as subsidence fees imposed on oil wells) Income taxes

    Some of these are not applicable in all instances. For example,

    A solar panel placed on one's home for use in generating electric power generally hasonly capital costs; once it's running there are no personnel costs, utility costs or

    depreciation and it uses no extra land (that wasn't already part of the place where it is

    located) so it has no real operating costs; however there may need to be taken into

    account costs of replacement if damaged.

    An automobile or any other item purchased for personal use has no salary cost becausethe owner does not charge themselves for operating the device.

    An item which isleasedmay have some or all of these costs included as part of thepurchase price.

    It might be questionable to assert that the cost of ten extra people on the sales force are an

    incremental cost or an overhead cost, since the wages for these people are both overhead and

    incremental. The staff needed to keep the shop operational are mostly considered as overhead.

    http://en.wikipedia.org/wiki/Salaryhttp://en.wikipedia.org/wiki/Salaryhttp://en.wikipedia.org/wiki/Wagehttp://en.wikipedia.org/wiki/Wagehttp://en.wikipedia.org/wiki/Wagehttp://en.wikipedia.org/wiki/Advertisinghttp://en.wikipedia.org/wiki/Advertisinghttp://en.wikipedia.org/wiki/Rentinghttp://en.wikipedia.org/wiki/Rentinghttp://en.wikipedia.org/wiki/Leasehttp://en.wikipedia.org/wiki/Leasehttp://en.wikipedia.org/wiki/Leasehttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Insurance_premiumhttp://en.wikipedia.org/wiki/Insurance_premiumhttp://en.wikipedia.org/wiki/Accidenthttp://en.wikipedia.org/wiki/Accidenthttp://en.wikipedia.org/wiki/Accidenthttp://en.wikipedia.org/wiki/Sabotagehttp://en.wikipedia.org/wiki/Sabotagehttp://en.wikipedia.org/wiki/Sabotagehttp://en.wikipedia.org/wiki/Negligencehttp://en.wikipedia.org/wiki/Negligencehttp://en.wikipedia.org/wiki/Negligencehttp://en.wikipedia.org/wiki/Terrorismhttp://en.wikipedia.org/wiki/Terrorismhttp://en.wikipedia.org/wiki/Terrorismhttp://en.wikipedia.org/wiki/Wear_and_tearhttp://en.wikipedia.org/wiki/Wear_and_tearhttp://en.wikipedia.org/wiki/Leasehttp://en.wikipedia.org/wiki/Leasehttp://en.wikipedia.org/wiki/Leasehttp://en.wikipedia.org/wiki/Incremental_costhttp://en.wikipedia.org/wiki/Incremental_costhttp://en.wikipedia.org/wiki/Incremental_costhttp://en.wikipedia.org/wiki/Leasehttp://en.wikipedia.org/wiki/Wear_and_tearhttp://en.wikipedia.org/wiki/Terrorismhttp://en.wikipedia.org/wiki/Negligencehttp://en.wikipedia.org/wiki/Sabotagehttp://en.wikipedia.org/wiki/Accidenthttp://en.wikipedia.org/wiki/Insurance_premiumhttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/Leasehttp://en.wikipedia.org/wiki/Rentinghttp://en.wikipedia.org/wiki/Advertisinghttp://en.wikipedia.org/wiki/Wagehttp://en.wikipedia.org/wiki/Salary

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