Operating Cost

Operating costs refer to the expenses incurred in the day-to-day running of a business. These costs include direct expenses like raw materials, wages, and utilities, as well as indirect costs such as administrative overhead. Operating costs are necessary for a company to generate revenue, and managing these costs efficiently is critical for maintaining profitability. Operating costs are typically listed on a company’s income statement.

Example

A restaurant's operating costs include food ingredients, kitchen staff wages, and utility bills for gas and electricity.