Future Business Leaders of America (FBLA) Marketing Practice Test

What type of expenses are referred to as operating expenses?

1. Short-term expenses

2. Long-term expenses

3. Fixed expenses

4. Variable expenses

The correct answer is: Short-term expenses

Operating expenses refer to the costs that a business incurs during its regular operations to keep the company running. These costs typically cover items such as rent, utilities, salaries, and raw materials. The correct understanding is that operating expenses encompass both short-term and some long-term costs associated with daily business activities rather than being restricted solely to short-term expenses. Short-term expenses generally relate to costs expected to be paid off within a year, while long-term expenses are those that extend beyond a year. Operating expenses can include both types of expenses as they facilitate the ongoing operations of a business. Therefore, the higher context of operating expenses includes costs that are essential for maintaining business functions in the short term. In contrast, fixed expenses are costs that do not fluctuate with the level of production or sales, such as lease payments, while variable expenses change directly with production levels, like material costs. Neither of these categories exclusively captures the comprehensive nature of operating expenses, which can include fixed or variable components.