What are Examples of Operating Expenses?

Examples of Operating Expenses

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Examples of Operating Expenses

Operating expenses, often abbreviated as OPEX, are the costs that a business incurs as a result of performing its normal business operations. They are the day-to-day expenses such as sales and administration, as well as research and development (R&D) that a company incurs from its normal operations. Here are some examples:

  • Rent: This is the cost paid for rented facilities such as office spaces or storage warehouses.
  • Utilities: These include costs related to electricity, internet, water, and any other necessary utility for operating facilities.
  • Salaries and Wages: This includes all salaries, wages, bonuses, and benefits that are paid to employees.
  • Depreciation and Amortization: These are the costs associated with spreading the cost of an asset over its useful life for tangible assets (depreciation) and intangible assets (amortization).
  • Insurance: This includes premiums for liability, workers’ compensation, property, and other types of business insurance.
  • Marketing and Advertising: This includes costs related to promoting products or services, branding, and advertising efforts.
  • Repair and Maintenance: These are the costs incurred for regular maintenance and repair of business property and equipment.
  • Office Supplies: This includes the cost of supplies like paper, ink, pens, etc.
  • Professional Fees: These are costs related to legal, accounting, consulting, or other professional services.
  • Travel Expenses: Costs related to business travel, such as flights, hotels, meals, and transportation, are considered operating expenses.

Operating expenses are essential for understanding the financial health of a company because they are subtracted from Gross Profit on the Income Statement to arrive at Operating Income, which is a measure of the profitability from core operations. This allows investors and analysts to see how well a company is managing its costs and operating its business.

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