OPERATING COST Meaning and
Definition
-
Operating cost refers to the expenses incurred by a business or organization in the regular course of its operations to generate revenue. It encompasses the day-to-day expenses needed to maintain and sustain the operations of a company or facility. Operating costs are crucial for calculating profitability and assessing the financial health of an organization.
The operating cost includes both fixed and variable expenses. Fixed costs are those expenses that remain constant regardless of the level of production or sales. These typically include rent, salaries, insurance, utilities, and depreciation on equipment. Variable costs, on the other hand, are expenses that fluctuate in direct proportion to the level of output or sales, such as raw materials, direct labor, packaging, or shipping costs.
By accurately calculating and managing operating costs, businesses can accurately assess the efficiency and profitability of their operations. Tracking and analyzing these costs allows companies to make informed decisions regarding pricing strategies, cost-cutting measures, resource allocation, and budgeting.
Operating costs are a vital component of financial statements, including the income statement and cash flow statement. In financial analysis, operating costs are often compared to revenue to determine profit margins or utilized as a benchmark for evaluating the cost-effectiveness of different production or operational strategies. Efficient management of operating costs is crucial for maximizing profitability and sustaining long-term success in any business or organization.
Common Misspellings for OPERATING COST
- iperating cost
- kperating cost
- lperating cost
- pperating cost
- 0perating cost
- 9perating cost
- ooerating cost
- olerating cost
- o-erating cost
- o0erating cost
- opwrating cost
- opsrating cost
- opdrating cost
- oprrating cost
- op4rating cost
- op3rating cost
- opeeating cost
- opedating cost
- opefating cost
Etymology of OPERATING COST
The word "operating cost" is formed by combining two separate words: "operating" and "cost".
The term "operating" is derived from the verb "operate", which originated from the Latin word "operari" meaning "to work" or "to labor". It entered the English language in the early 17th century with the same meaning.
The word "cost" has Old French roots, originating from the word "cout" or "coste", which meant "expense" or "outlay". It was influenced by the Latin word "constare", meaning "to stand at" or "to cost". In Middle English, the word "cost" gained the meaning of "price" or "value" and has retained that definition since then.
When the two words are combined, "operating cost" refers to the expenses or expenditure necessary for the maintenance and functioning of a particular operation or system.
Similar spelling words for OPERATING COST
- operating surgeon,
- operational,
- operatic star,
- operating system,
- operating budget,
- operating expense,
- operationalist,
- operating room,
- operationally,
- operationalism,
- operation code,
- operating theater,
- operating table,
- operating theatre,
- operating capital.
Infographic
Add the infographic to your website:
