Operating expenses—also called selling, general and administrative expenses (SG&A)—are the costs of running a business. They include rent and utility costs, marketing expenditures, computer equipment and employee benefits. They do not fluctuate directly with manufacturing or purchase volumes so they are typically described as fixed or semi-variable in nature.
Operating expenses are categorized as indirect expenses on a company’s income statement because they do not directly contribute to the making of a product or delivery of a service.
More about operating expenses
Here’s an example of how operating expenses appear on a manufacturing company’s income statement. In this case, ABC Company manufactures a single product. The selling, general and administration expenses to go to market are $15,000, $5,000 and $5,000, respectively.
That means the total operating expenses to go to market are $25,000.