HOME

TheInfoList




An operating expense, operating expenditure, operational expense, operational expenditure or opex is an ongoing cost for running a product, business, or system . Its counterpart, a
capital expenditure Capital expenditure or capital expense (capex or CAPEX) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure ...
(capex), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of a
photocopier A photocopier (also called copier or copy machine, and formerly Xerox machine, the generic trademark A generic trademark, also known as a genericized trademark or proprietary eponym, is a trademark A trademark (also written trade mark ...
involves capex, and the annual paper,
toner Toner is a powder A powder is a dry, bulk solid Solid is one of the four fundamental states of matter (the others being liquid, gas and plasma). The molecules in a solid are closely packed together and contain the least amount of ...

toner
, power and maintenance costs represents opex. For larger systems like businesses, opex may also include the cost of workers and facility expenses such as rent and utilities.


Overview

In
business Business is the activity of making one's living or making money by producing or buying and selling products (such as goods and services). Simply put, it is "any activity or enterprise entered into for profit." Having a business name A trad ...

business
, an operating expense is a day-to-day
expense Expenditure is an outflow of money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main function ...
such as
sales Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in ...

sales
and
administration Administration may refer to: Management of organizations * Management, the act of directing people towards accomplishing a goal ** Administration (government), management in or of government *** Administrative division ** Academic administratio ...
, or
research & development Research is "creativity, creative and systematic work undertaken to increase the stock of knowledge". It involves the collection, organization, and analysis of information to increase understanding of a topic or issue. A research project ma ...
, as opposed to production, costs, and pricing. In short, this is the
money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of money are distinguished as: a ...

money
the business spends in order to turn
inventory Inventory (American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of varieties of the English language native to the United States. Currently, American English ...
into
throughput In general terms, throughput is the rate of production or the rate at which something is processed. When used in the context of communication networks, such as Ethernet Ethernet () is a family of wired ing technologies commonly used in s ...
. On an
income statement An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''statemen ...
, "operating expenses" is the sum of a business's operating expenses for a period of time, such as a month or year. In
throughput accounting Throughput accounting (TA) is a principle-based and simplified management accounting approach that provides managers with decision support information for enterprise profitability improvement. TA is relatively new in management accounting. It is an ...
, the
cost accounting Cost accounting is defined as "a systematic set of procedures for recording and reporting measurements of the cost of manufacturing goods and performing services in the aggregate and in detail. It includes methods for recognizing, classifying, all ...
aspect of the theory of constraints (TOC), operating expense is the
money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The main functions of money are distinguished as: a ...

money
spent turning
inventory Inventory (American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of varieties of the English language native to the United States. Currently, American English ...
into
throughput In general terms, throughput is the rate of production or the rate at which something is processed. When used in the context of communication networks, such as Ethernet Ethernet () is a family of wired ing technologies commonly used in s ...
.Goldratt, E. M., & Cox, J. "The Goal: A Process of Ongoing Improvement" (Rev. ed.). (1986)., p. 61. In TOC, operating expense is limited to costs that vary strictly with the quantity produced, like raw materials and purchased components. Everything else is a
fixed cost In accounting Accounting or Accountancy is the measurement ' Measurement is the number, numerical quantification (science), quantification of the variable and attribute (research), attributes of an object or event, which can be used to compa ...

fixed cost
, including labour (unless there is a regular and significant chance that workers will not work a full-time week when they report on their first day). In a
real estate Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more genera ...

real estate
context, operating expenses include costs associated with the operation and maintenance of an income-producing property. Operating expenses include: * accounting expenses *
license A license (American English American English (AmE, AE, AmEng, USEng, en-US), sometimes called United States English or U.S. English, is the set of variety (linguistics), varieties of the English language native to the United States. Cur ...

license
fees * maintenance and repairs, such as snow removal, trash removal, janitorial service, pest control, and lawn care * advertising * office expenses * supplies * attorney fees and legal fees * utilities, such as telephone * insurance * property management, including a resident manager * property taxes * travel and vehicle expenses :Travel expenses are defined as those incurred in the event of travel required for professional purposes. ::For this purpose, “travel” is defined as the simultaneous absence from the
residence A residence is a place (normally a building) used as a home A home, or domicile, is a space used as a permanent or semi-permanent residence for one or many Human, humans. It is a fully or semi sheltered space and can have both interior an ...

residence
and from the regular place of
employment Employment is the relationship between two parties Image:'Hip, Hip, Hurrah! Artist Festival at Skagen', by Peder Severin Krøyer (1888) Demisted with DXO PhotoLab Clearview; cropped away black border edge.jpg, 300px, ''Hip, Hip, Hurrah!'' ...

employment
. It is prompted by professional or company purposes and likely does not concern the traveler’s private life, or concerns it only to a small degree. Travel expenses include travel costs and fares, accommodation expenses, and so-called additional expenses for
meal A meal is an eating Eating (also known as consuming) is the ingestion Ingestion is the consumption of a substance by an organism In biology, an organism (from Ancient Greek, Greek: ὀργανισμός, ''organismos'') is any in ...

meal
s. * leasing commissions * salary and wages


See also

*
Capital expenditure Capital expenditure or capital expense (capex or CAPEX) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure ...
(capex) *
Total cost of ownership Total cost of ownership (TCO) is a financial estimate intended to help buyers and owners determine the direct and indirect costs Indirect costs are costs that are not directly accountable to a cost object A cost object is a term used primarily i ...
(TCO) *
Capital budgeting Capital most commonly refers to: * Capital letter Letter case (or just case) is the distinction between the letters that are in larger uppercase or capitals (or more formally ''majuscule'') and smaller lowercase (or more formally ''minusc ...
*
Freight expense In accounting Accounting or Accountancy is the measurement, processing, and communication of financial and non financial information about economic entity, economic entities such as businesses and corporations. Accounting, which has been ca ...
*
Operating cost Operating costs or operational costs, are the expenseExpenditure is an outflow of money, or any form of Wealth, fortune in general, to another person or group as payment for an item, service, or other category of costs. For a leasehold estate, tena ...
*
Overhead (business) In business, overhead or overhead expense refers to an ongoing expenseExpenditure is an outflow of money, or any form of Wealth, fortune in general, to another person or group as payment for an item, service, or other category of costs. For a lease ...


References


Further reading

* Harry I. Wolk, James L. Dodd, Michael G. Tearney. ''Accounting Theory: Conceptual Issues in a Political and Economic Environment'' (2004). . * Angelico A. Groppelli, Ehsan Nikbakht. ''Finance'' (2000). . * Barry J. Epstein, Eva K. Jermakowicz. ''Interpretation and Application of International Financial Reporting Standards'' (2007). . * Jan R. Williams, Susan F. Haka, Mark S. Bettner, Joseph V. Carcello. ''Financial & Managerial Accounting'' (2008). .1 * Goldratt, E. M., & Cox, J. (1986). The Goal: A Process of Ongoing Improvement (Rev. ed.). . {{DEFAULTSORT:Operating Expense Expense