Operating cost

Operating costs are the expenses which are related to the operation of a business, or to the operation of a device, component, piece of equipment or facility. They are the cost of resources used by an organization just to maintain its existence.

    Business operating costs

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

    Business overhead costs

    Overhead costs for a business are the cost of resources used by an organization just 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:

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

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

    It includes all operating cost such as salary, rent, stationery, furniture etc.

    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 the capital cost of 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 equipment — unless the equipment has no cost to operate, requires no personnel or space and never wears out (any examples? perhaps intangibles, though not equipment, per se). In some cases, equipment may appear to have low or no operating cost 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:

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

    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 overhead.


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