An operating expense (opex) is an ongoing cost for running a product, business, or system. Its counterpart, a ''

capital expenditure Capital expenditure or capital expense (abbreviated capex, 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 ...

'' (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) is a machine that makes copies of documents and other visual images onto paper or plastic film quickly and cheaply. Most modern photocopiers ...

involves capex, and the annual paper, 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

business Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for ...

, an operating expense is a day-to-day

expense An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition i ...

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. A period during which goods are sold for a reduced price may also be referred ...

and

administration Administration may refer to: Management of organizations * Management, the act of directing people towards accomplishing a goal: the process of dealing with or controlling things or people. ** Administrative assistant, traditionally known as a se ...

, or research & development, as opposed to production. 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 primary functions which distinguish money are: m ...

the business spends in order to turn

inventory Inventory (British English) or stock (American English) is a quantity of the goods and materials that a business holds for the ultimate goal of resale, production or utilisation. Inventory management is a discipline primarily about specifying ...

into

throughput Network throughput (or just throughput, when in context) refers to the rate of message delivery over a communication channel in a communication network, such as Ethernet or packet radio. The data that these messages contain may be delivered ov ...

. 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'', ''statement o ...

, "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. This approach identifies the factors which limit an or ...

, the

cost accounting Cost accounting is defined by the Institute of Management Accountants 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 includ ...

aspect of the

theory of constraints The theory of constraints (TOC) is a management paradigm that views any manageable system as being limited in achieving more of its goals by a very small number of constraints. There is always at least one constraint, and TOC uses a focusing p ...

(TOC), operating expense is the

spent turning

into

.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, 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 context, operating expenses include costs associated with the operation and maintenance of an income-producing property. Operating expenses include: * salary and wages * accounting expenses *

license A license (American English) or licence (Commonwealth English) is an official permission or permit to do, use, or own something (as well as the document of that permission or permit). A license is granted by a party (licensor) to another part ...

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 and from the regular place of

employment Employment is a relationship between two party (law), parties Regulation, regulating the provision of paid Labour (human activity), labour services. Usually based on a employment contract, contract, one party, the employer, which might be a cor ...

. 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 occasion that takes place at a certain time and includes consumption of food. The English names used for specific meals vary, depending on the speaker's culture, the time of day, or the size of the meal. A meal is different from a ...

s. * leasing commissions

Overview

See also

Notes

References

Further reading