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Anoperating expense (opex)[a] is an ongoing cost for running a product, business, or system.[1] Its counterpart, acapital expenditure (capex), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of aphotocopier involves capex, and the annual paper,toner, power and maintenance costs represents opex.[2] For larger systems like businesses, opex may also include the cost of workers and facility expenses such as rent and utilities.[3]
Inbusiness, an operating expense is a day-to-dayexpense such assales andadministration, orresearch & development, as opposed toproduction. In short, this is themoney the business spends in order to turninventory intothroughput.
On anincome statement, "operating expenses" is the sum of a business's operating expenses for a period of time, such as a month or year.
Inthroughput accounting, thecost accounting aspect of thetheory of constraints (TOC), operating expense is themoney spent turninginventory intothroughput.[4] In TOC, operating expense is limited to costs that vary strictly with the quantity produced, like raw materials and purchased components. Everything else is afixed 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 areal estate context, operating expenses include costs associated with the operation and maintenance of an income-producing property.
Operating expenses include:
Accountants draw a distinction between expenditures that yield benefits only in the immediate period or periods (such as labor and material for a manufacturing firm) and those that yield benefits over multiple periods (such as land, buildings and long-lived plant). The former are called operating expenses and are subtracted from revenues in computing the accounting income, while the latter are capital expenditures and are not subtracted from revenues in the period that they are made. Instead, the expenditure is spread over multiple periods and deducted as an expense in each period - these expenses are called depreciation (if the asset is a tangible asset like a building) or amortization (if the asset is an intangible asset like a patent or a trade mark).
