DECA Sports and Entertainment Marketing Practice Exam

What term refers to all costs associated with running a business in addition to the cost of merchandise?

1. Opportunity Cost

2. Fixed Cost

3. Operating Expense

4. Variable Cost

The correct answer is: Opportunity Cost

The term that refers to all costs associated with running a business, in addition to the cost of merchandise, is operating expense. Operating expenses cover various costs required to maintain a business's day-to-day functions, including rent, utilities, salaries, and marketing expenses. These expenses are crucial for a company to function but do not directly relate to the production of goods sold, which distinguishes them from the cost of merchandise. Opportunity cost is a concept that deals with the value of the next best alternative foregone when a decision is made, not a direct classification of business costs. Fixed costs refer to expenses that do not change with the level of production or sales, such as rent or salaries, while variable costs fluctuate with production levels, like raw materials. Understanding operating expenses helps businesses manage their budgets effectively and assess profitability accurately.