Operating costs

The operating cost, or fixed cost, is the part of the company's costs that does not change in proportion to the amount of production.

A business costs divided into two large groups, the fixed and the variable costs. Variable costs are those that change in proportion to the amount of production, typically the cost of materials and goods. 

In some companies, however, other costs may also be included. For many companies, the fuel cost is one of the fixed items, but for a haulage company, it is closely related to performance, so it is a variable cost for them. In the same way, the electricity bill is typically a fixed cost, but in a bakery, the amount of electricity used depends on the number of baked breads, and office lighting is not included, so we consider this a variable cost there. 

Fixed costs are also known as operating costs. This includes, for example, office rent, administrative costs, a labour costs, the overhead, the bookkeeping cost, the recorded loans paid by us interest, and much more.

The operating cost is a Financial Planning used to define it as the part of the costs for which it is margin must provide collateral . The margin is the difference between the material cost and the selling price of the product we produce. The price of the hamburger we produce must be higher than the total material cost of the bun, meat and other goodies that go into it. 

The difference is the margin, which has to collateral the premises, employees, overhead and everything else if we want our burger joint to be profitable. This is also why the aggregate margin is called margin. In this context, our company breaks even if the margin built into our price is exactly the same as the operating costs. If we can sell our artisan hamburger at a higher price than this, because it is great, juicy and delicious, then there is a profit . 

It is advisable to use this model for financial planning because it creates simple and clear connections between income and expenses.