1. What is Operating Expense?

Operating Expense represents the costs incurred by a business through its normal business operations, excluding cost of goods sold (COGS). It includes Selling, General & Administrative expenses (SG&A), Research & Development (R&D), and Depreciation.

2. How Does the Calculator Work?

The calculator uses the Operating Expense formula:

Where:

• \( SG\&A \) — Selling, General & Administrative expenses (USD)
• \( R\&D \) — Research & Development costs (USD)
• \( Depreciation \) — Depreciation expense (USD)

Explanation: This formula calculates the total operating expenses by summing up all major operational cost components excluding COGS.

3. Importance of Operating Expense Calculation

Details: Operating expense calculation is crucial for financial analysis, budgeting, and determining operational efficiency. It helps businesses understand their cost structure and identify areas for cost optimization.

4. Using the Calculator

Tips: Enter SG&A, R&D, and Depreciation amounts in USD. All values must be non-negative numbers representing valid expense amounts.

5. Frequently Asked Questions (FAQ)

Q1: What is included in SG&A expenses?
A: SG&A includes salaries, marketing expenses, office supplies, rent, utilities, and other administrative costs not directly tied to production.

Q2: Are R&D expenses always included in operating expenses?
A: Yes, R&D is typically classified as an operating expense since it represents ongoing business operations and innovation efforts.

Q3: How does depreciation affect operating expenses?
A: Depreciation represents the allocation of asset costs over their useful life and is included in operating expenses to reflect the cost of using fixed assets.

Q4: What is the difference between operating expenses and COGS?
A: COGS represents direct costs of producing goods, while operating expenses represent indirect costs of running the business operations.

Q5: Why is operating expense ratio important?
A: The operating expense ratio (operating expenses ÷ revenue) indicates how efficiently a company manages its operating costs relative to its revenue.