Operating Expense Examples

Operating Expense Examples

The examples of the Operating expenses are legal fees, rent, depreciation, office equipment, and supplies,  Accounting expenses, insurance, repairs and maintenance expenses, utility expenses like electricity, water, etc, telephone and internet expenses,  property taxes, payroll tax expenses, pensions, advertisement expenses, entertainment costs, travel costs, marketing, commissions, direct mailing expenses, bank charges and many more.

In simple terms, OpexOpexOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. Therefore, they are readily available in the income statement and help to determine the net profit.read more refers to the money spent on running the business operations of the company smoothly. Generally referred to as “OPEX Cost,” and is the primary concern for the management of the company to reduce the same without affecting the product quality and to stay ahead of the competitors. Operating Expense is the Sum total of all the expenses excluding the cost of goods sold, interest, taxes, and non-cash expensesNon-cash ExpensesNon-cash expenses are those expenses recorded in the firm's income statement for the period under consideration; such costs are not paid or dealt with in cash by the firm. It involves expenses such as depreciation.read more like depreciation and amortization to the income statement.

Operating Expense Examples

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Source: Operating Expense Examples (wallstreetmojo.com)

Below are the top 15 most examples of operating expenses (OPEX) –

  1. Salaries paid to the Employees
  2. Rent
  3. Insurance
  4. Utility Bills
  5. Office Admin Expense
  6. Repairs & Maintenance
  7. Printing & Stationery
  8. Property Taxes
  9. Direct Material CostDirect Material CostDirect Material Cost is the total cost incurred by the company in purchasing the raw material along with the cost of other components including packaging, freight and storage costs, taxes, etc. that are related directly to the manufacturing and production of various products of the company.read more
  10. Advertising Cost
  11. Entertainment Cost
  12. Travel Cost
  13. Conveyance
  14. Telephone Expense
  15. Selling ExpensesSelling ExpensesThe amount of money spent by the sales department on selling a product is referred to as selling expenses. This includes expenses incurred on advertising, distribution and marketing. Because it is indirectly related to the production and delivery of goods and services, it is classified as an indirect cost.read more

Let us discuss each one of them in a bit more detail.

Most Common Examples of Operating Expense (OPEX)

Compensation based operating expenses (OPEX)

  • Salaries – Salaries paid to the employees of the company and is one of the most critical expenses for any company being fixed in nature. It includes gratuity, pension, pf, etc.
  • House Rent Allowance: It refers to the allowance given by the employer to the employee to stay in a house on rent. It forms part of the CTC to the employee and can be claimed from the company.

These are the day to day expenses of the company to run the business operations smoothly and includes the below mentioned:

Sales & Marketing Expenses (OPEX)n

It refers to the expenses incurred to generate business for the company and to expand its existing operations. It includes the following :

Conclusion

Operating expenses form a major component for analyzing the financial position of the company and compare them with peers. A low operating expense ratioOperating Expense RatioOperating Expense Ratio is the ratio between the cost of operation to the net revenue and is commonly used to evaluate real estate properties. A higher Operating Expense ratio indicates that the company's operating expenses are higher than its property income, which acts as a deterrent. A lower operating expense ratio implies lower operating costs, which is preferred and investment-friendly.read more gives the company the strength to expand and grow in the future.

  • In the initial stages of the company, the opex will be very high since the company has just started its operations by spending heavily on infrastructure, human capital, and marketing expenses. Gradually this ratio starts declining when the company is able to generate revenues on a larger scale.
  • However, in the case of a liquidity crisis in the company, the opex plays a vital role in decision making. The departments with higher opex costs are close down, and those with lower opex costs continue.

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This has been a guide to Operating Expense Examples. Here we discuss the 15 most common examples of operating expenses (OPEX) along with a detailed explanation. You can learn more about finance from the following articles –

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