What are the types of operational costs?

Types of operational costs are:

1. Variable costs: You have several expenses that may change from week to week or month to month. These costs go up when you produce or sell more. Examples include production wages, raw materials and shipping costs. You can track these over a one-year period and divide by 12 to find an average variable cost. Whenever you decide to ramp up production or offer sales bonuses, be aware that you will increase your variable costs.
2. Fixed costs: Several of your operational costs remain fixed each month. These include rent or mortgage payments, salaries for non-production personnel, insurance, lease payments, Internet hosting, phone service and building maintenance. Think of your fixed costs as the expense for opening your doors each day. You incur fixed costs no matter how much or how little you manufacture or sell. Look for ways to increase sales while cutting fixed costs and you can build company profitability.
3. Interest: Although you might think of your interest expenses as “fixed” because you know what they will be each month, you should look at them as costs you incur because you borrow money to grow your business. Track your interest on loans, overdraft protection, company credit cards and unpaid balances you owe to vendors. Categorize these as interest costs when figuring your total operational costs. Whenever you decide to fund an expansion with borrowed money, you will know you are planning to increase your interest portion of your operational costs.
4. Depreciation: Part of your operational expenses includes the value you lose each month on buildings, equipment, vehicles and office furniture. This depreciation counts as an ongoing operational expense and should be included when you do your accounting each month. The Internal Revenue Service allows you to write off depreciation on your annual taxes because the lost value in your assets costs you when you finally sell them

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