Definition

Noun: - The expense of maintaining property or running a business: This refers to the ongoing, regular costs required for the day-to-day functioning of a property, asset, or business operation. It includes payments for utilities, insurance, property taxes, and routine maintenance, but explicitly excludes capital costs like depreciation, financing costs (e.g., loan interest), and income taxes.

Usage

This term is used primarily in business, accounting, and personal finance contexts to describe the recurring expenses necessary to keep something functional. It is a key metric for assessing the efficiency and financial health of an operation.

Examples

• Noun:
  • The high operating cost of the factory, due to expensive energy bills, is a major concern for management.
  • When calculating profitability, you must subtract the operating cost from the gross revenue.
  • Rising property taxes significantly increased the building's operating cost this year.

Advanced Usage

• "To keep operating costs down": To manage or reduce regular expenses.
  • The company switched to LED lighting to keep operating costs down.
• "Fixed vs. Variable operating costs": A distinction between costs that remain constant (like rent or insurance) and those that fluctuate with activity level (like raw materials or utility usage).
  • A large portion of our budget is dedicated to fixed operating costs.

Variants and Related Words

• Operating expense (often abbreviated as OPEX) (n): A synonym frequently used in corporate finance and accounting.
  • Salaries are considered an operating expense.
• Overhead (cost) (n): A broader term that can include operating costs but often refers to all ongoing business expenses not directly tied to producing a specific product or service.
  • Rent and administrative salaries are part of our overhead.

Synonyms

• Running cost: An informal synonym emphasizing the expense of keeping something running.
• Maintenance cost: Specifically highlights costs related to upkeep and repair, which are a component of operating cost.

Related Phrases

• Cost of operations: A formal phrase with the same meaning.
  • The cost of operations has risen with inflation.
• Operating budget: A financial plan that forecasts operating costs.
  • The department exceeded its operating budget this quarter.

Noun

1. the expense of maintaining property (e.g., paying property taxes and utilities and insurance); it does not include depreciation or the cost of financing or income taxes