What is operating cost

An operating cost is the expenses a company has in connection with the operation of the business.

Typical operating costs can for example be transportation, raw material, and labor costs.

Fixed and variable operating costs

Operating costs are often divided into fixed and variable costs. The variable costs, as the name suggests, will increase or decrease depending on how much the company produces and sells, and the fixed costs will remain more stable and typically include labor costs, rent, electricity, and similar.