Operating expenses include costs that are essential for running the business day-to-day. These can be categorized into:
Fixed Costs: Expenses that remain constant regardless of the level of production or sales, such as rent, salaries, and insurance. Variable Costs: Expenses that fluctuate with the level of production or sales, including raw materials, utilities, and commission-based salaries. Administrative Expenses: Costs associated with the general administration of the business, such as office supplies and legal fees.