Operating Cost
Candlefocus EditorThe cost of goods sold (COGS) is the direct costs required to produce and deliver a product or service to the customer. This includes direct costs for labor, materials, and other direct costs associated with the product itself. Examples of COGS includes, materials and supplies, direct labor and production facility costs, direct packaging materials and production costs, and freight out costs.
Other operating costs, referred to as SG&A expenses, are those operational costs associated with the management of the company’s normal business activities, such as administration and marketing. Examples of SG&A expenses include rent, utilities, stationery, salaries and wages, advertising, marketing, professional fees, travel and entertainment expenses, and research and development costs.
Analyzing operating costs is essential for any business as it can provide valuable insight and information about a business’s performance. Operating costs can be found from a company’s income statement. The income statement shows the company’s total operating costs, gross profit, net income, and other related figures. By looking at the income statement, a business can assess its operating costs, measure against its income and profits, and make adjustments to improve its efficiency and profitability.
Operating costs are essential for the running of any business. They should be regularly monitored and analyzed in order to ensure that the business is running as efficiently and profitably as possible. By tracking and analyzing these costs, a business can identify areas of improvement and make necessary adjustments to improve the overall performance of the company.