Financial Terms / operating expense

Operating Expense Costs for Businesses

Operating expense is an essential cost for keeping a business, product, or system running smoothly.


Operating Expense = SG&A + Selling Expenses

How do I calculate the operating expense?

In order to calculate Operating Expense (Opex), you should use the following formula: Total Expense - Cost of Goods Sold = Operating Expense. This can be done using a spreadsheet program such as  Sourcetable. In order to accurately calculate the Operating Expense, all expenses that are incurred during normal business operations should be included. This includes costs such as staff salaries, rent, utilities, and other costs.

What is an operating expense?

An operating expense is an expense a business pays for normal business operations. These expenses include rent, equipment, inventory costs, marketing, payroll, insurance, step costs, and funds allocated for research and development.

Can businesses deduct operating expenses?

Yes, the IRS allows businesses to deduct operating expenses.

Are operating expenses necessary for businesses?

Yes, operating expenses are necessary for most businesses.

Key Points

How do I calculate operating expense?
Operating Expense = SG&A + Selling Expenses
Operating expenses are the costs of doing business
Operating expenses are the costs associated with running a business, such as wages, utilities, and rent. These costs are reflected on a company's income statement and are necessary for the company to continue to operate.
Operating expenses are reflected on a company's income statement
A company's income statement is an important financial document that displays a company's income and expenses. Operating expenses are a major component of this document and are broken down into categories such as labor, materials, and other costs.

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