What are Operating Expenses primarily composed of?

Operating expenses are primarily composed of selling, general, and administrative expenses, which encompass the costs that a company incurs as part of its day-to-day operations, excluding the cost of goods sold. These expenses are crucial for maintaining the overall functionality of the business, covering areas like salaries for staff not directly involved in production, marketing costs, office supplies, and rent for operational facilities.

Understanding the nature of operating expenses is essential for evaluating a company's financial health. They reflect the ongoing costs necessary to run the operations, contribute to revenue generation, and provide a clear picture of operational efficiency when analyzed in relation to revenues. In contrast, the other options include various components that do not fit the primary definition of operating expenses as they pertain to more specialized or direct production costs.