Enter the salaries, sales commission, advertising cost, rental expense, and utilities into the calculator to determine the operating expense.
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Operating Expense Formula
The following formula can be used to calculate the operating expense of a business.
OE = S + C + A + R + U
- Where OE is the operating expense
- S is the total salaries
- C is total commissions
- A is the advertising cost
- R is the rental or building cost
- U is utilities
Operating Expense Definition
An operating expense is the total cost associated with the operational portion of the cost of a produced good or service. These operational expenses include the 5 things listed above.
Operating Expense Example
How to calculate operating expense?
- First, determine the total salaries.
Calculate the total cost of all salaries.
- Next, determine the total commissions.
Calculate the total commissions on all sales.
- Next, determine the advertising cost.
Calculate the cost of advertising associated with the product.
- Next, determine the building cost and utilities.
Calculate the cost to own or rent the building the company is in as well as the utilities used.
- Finally, calculate the operating expense.
Calculate the operating expense using the equation above.
Operating expense is a measure of all expenses that are not direct labor or direct material costs that go into a product.
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