OPERATING COSTS Meaning and
Definition
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Operating costs refer to the ongoing expenses that a business incurs as a result of its day-to-day operations. These costs are essential for sustaining normal business activities and can be classified into various categories.
One major component of operating costs is the cost of goods sold (COGS), which includes expenses directly associated with the production or sale of a product or service. This may encompass raw materials, direct labor, and manufacturing overhead. Another key category is general and administrative expenses, covering salaries, office rent, utilities, insurance, and other overhead costs required to maintain the business infrastructure.
Operating costs also include expenses related to sales and marketing, such as advertising, promotions, and commissions. Additionally, businesses may incur costs for research and development, as well as legal and accounting services. Operating costs can further involve costs of maintaining and repairing equipment, as well as transportation and distribution expenses.
Monitoring and controlling operating costs are crucial for business profitability and sustainability. Inefficiencies or unnecessary expenditures in these areas can negatively impact a company's bottom line. Therefore, businesses often implement cost management strategies to optimize their operating costs, seeking to reduce expenses without compromising the quality of products or services.
Overall, operating costs encompass the diverse range of ongoing expenses that a business must manage to enable the smooth functioning and maintenance of its operations.
Common Misspellings for OPERATING COSTS
- iperating costs
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Etymology of OPERATING COSTS
The word "operating costs" is composed of two parts: "operating" and "costs".
The term "operate" comes from the Latin word "operari", meaning "to work" or "to perform". It entered the English language around the early 17th century.
The word "cost" has its origins in the Old French word "coste", which means "cost" or "expense". It is derived from the Latin word "constare", meaning "to stand together" or "to cost". This Latin root has also influenced other words related to expenses, such as "costly" or "costume".
Therefore, the etymology of "operating costs" essentially refers to the expenses associated with the functioning or performing of a particular operation or activity.
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