The definition of operating expenses are the different expenses that a company incurs for the proper functioning of the main activity. It refers mainly to the ordinary expenses of the company that are precise for the purpose for which it was established, that is, the expenses associated with the normal activity of the company.
Example of operating expenses
An example of operating expenses in the case of a furniture factory are those precise expenses for the manufacture of furniture, such as the wood used to make the pieces or the salary of the workers.
There are different types of operating expenses. Operating expenses include different items, among which are:
- The costs associated with labor: these are fixed costs, regardless of the amount of product that is marketed. There is room in this section salaries and salaries of employees, in addition to the social charges related to them such as Social Security contributions and withholdings for IRPF.
- Expenses related to the consumption of raw materials or merchandise: They refer to variable expenses and may be lower or higher depending on the amount of product offered. Continuing with the example of the furniture factory, in this aspect would fit the necessary raw materials for the manufacture of furniture (wood, veneers, glassware, etc).
- Other fixed operating expenses: these are fixed costs that are presented independently of the product presented. In this sense, the rental of facilities, insurance, water and electricity costs are included.
The concept of operating expenses is of certain importance for companies companies, since from them it will be possible to calculate the operating result, which is achieved through the difference between operating income and operating expenses.
The result of operating cycle indicates the profit or losses registered exclusively by the main activity of the company, without taking into account the tax burden or the financial result.