Future Business Leaders of America (FBLA) Agribusiness Practice Test

Which statement best describes operating expenses?

1. Costs directly associated with producing a product

2. General costs of running the business that do not include direct costs

3. Costs that are solely dependent on revenue

4. Expenses related to financing activities

The correct answer is: General costs of running the business that do not include direct costs

Operating expenses refer to the general costs necessary for running a business that are not directly tied to the production of a product. This includes expenses like rent, utilities, salaries of administrative staff, and office supplies. These costs are crucial for maintaining the day-to-day operations of a business but do not include the materials or labor directly involved in manufacturing goods, which are classified separately as production costs. The other options focus on different categorizations of costs that do not fully encapsulate the essence of operating expenses. For example, costs directly associated with producing a product are categorized as production costs, not operating expenses. Expenses that are solely dependent on revenue typically relate to variable costs or sales-related activities, which also fall outside the definition of operating expenses. Finally, expenses related to financing activities pertain to funding and investment costs rather than the operational side of running a business. Thus, the distinction of operating expenses as the general costs of running a business is clearly articulated in the correct statement.