Operating Expenses are periodic expenses necessary to maintain and maintain production of effective gross income. Operating expenses include fixed expenses and variable expenses including replacement reserves.
Expenses such as depreciation, debt service, capital expenditures, federal income taxes, capital improvements and other expenses not related to the production of income are not included as operating expenses. (See Other Expenses.)
Operating expenses are categorized into:
The total of fixed expenses, variable expenses, and reserves constitute total operating expenses.