Operating Costs, also known as Cost of Goods Sold (COGS), is a cost which is directly related to everything needed to keep a business up and running.
Examples for Operating Costs include items such as payroll, rent, office supplies, utilities, marketing, insurance, accounting, legal fees and taxes. Calculating Operating Costs requires only that you add up the expenses that make up your annual fixed costs and your variable costs. To reduce Operating Costs many businesses increase their outsourced staff or become more eco-friendly (lower electricity bills, no paper, etc.).
Operating Costs = Costs of Goods Sold + Operating Expenses
- COGS – Cost of Goods Sold
- Fixed Costs
- Variable Costs