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Operating Expense Formula Excel Template

The document provides examples to illustrate how to calculate operating expenses for a company using two different approaches. It shows the calculation for a manufacturing company using expenses like sales commission, advertising, salaries etc. It then shows an alternate approach using revenue, cost of goods sold, operating income etc. It also shows both calculations for Apple Inc using data from its income statement.

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Jaspreet Gill
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285 views5 pages

Operating Expense Formula Excel Template

The document provides examples to illustrate how to calculate operating expenses for a company using two different approaches. It shows the calculation for a manufacturing company using expenses like sales commission, advertising, salaries etc. It then shows an alternate approach using revenue, cost of goods sold, operating income etc. It also shows both calculations for Apple Inc using data from its income statement.

Uploaded by

Jaspreet Gill
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Operating Expense Excel Template

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Let us take the example of a manufacturing company to illustrate the computation of operating expenses. According
to the latest annual report, the following information is available from the income statement of the company:

Particulars Amount (in million)


Sales Commission $1.20
Advertising Expense $2.00
Salaries $1.00
Depreciation $0.75
Rent $0.50
Utilities $0.30

Operating Expense is calculated using the formula given below


Operating Expense = Sales Commission + Advertising Expense +
Salaries + Depreciation + Rent + Utilities

Operating Expense $5.75


expenses. According
the company:
Let us take the example of a company to illustrate the computation of operating expenses using
the alternate approach. The following financial information is available about the company:

Particulars Amount (in million)


Revenue $40.00
Direct Labor $5.25
Raw Material Cost $9.75
Manufacturing Overhead $1.25
Net Income $6.00
Interest Expense $2.00
Taxes $2.50

COGS is calculated using the formula given below


COGS = Direct Labor + Raw Material Cost + Manufacturing Overhead

COGS $16.25

Operating Income is calculated using the formula given below


Operating Income (EBIT) = Net Income + Interest Expense + Taxes

Operating Income $10.50

Operating Expense is calculated using the formula given below


Operating Expense = Revenue - Operating Income - COGS

Operating Expense $13.25


Let us take the example of Apple Inc. to illustrate the computation of operating expenses using both
approaches. According to an income statement for 2018, the following information is available:

Particulars Amount (in million)


Revenue $265,595
Cost of Sales $163,756
Research and Development $14,236
Expense
Selling, General and $16,705
Administrative Expense
Operating Income (EBIT) $70,898

First Approach

Operating Expense is calculated using the formula given below


Operating Expense = Research and Development Expense +
Selling, General and Administrative Expense

Operating Expense $30,941

Alternate Approach

Operating Expense is calculated using the formula given below


Operating Expense = Revenue - Operating Income - Cost of Sales

Operating Expense $30,941

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