What are operating expenses?

Operating expenses refer to the costs that a business incurs during its normal daily operations, which are not directly tied to the production of goods sold. This includes a wide range of expenses necessary for running the business, such as wages, rent, utilities, and office supplies. By focusing specifically on the ongoing costs of operating the business, this definition highlights the expenses that allow the company to maintain its basic functions and support its revenue-generating activities.

This answer distinctly separates operating expenses from the cost of goods sold (COGS), which relates specifically to the expenses tied to the production of products. While administrative expenses like rent and utilities are included under operating expenses, they do not encompass all types of operating expenses, as defined in the correct answer. The notion of one-time costs for capital improvements falls outside the regular operational costs, making it irrelevant in defining operating expenses. Thus, option B accurately captures the essence of what constitutes operating expenses within the context of financial accounting.