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himishim t1_iu3v34e wrote

Reply to comment by respawn_12 in [OC] Apple may be the most resilient among the FAANGs this Earnings Season by Oktay_LS

Operating costs would be costs that are not directly associated with the products or services produced. For example, to produce an individual iPhone, the material and labour would be part of the cost of revenue since you can attribute a specific cost per item for the good. However, the rent you pay for the factory would be part of the operating cost since it is not tied directly to producing the iPhone. You would be the same rent if you produced 0 iPhones for that period or 1m.

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respawn_12 t1_iu4521c wrote

Do you know any good resources for beginners to learn this ? Like how to read financial reports and deduce the health of the company ?

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vikas_g t1_iu4m039 wrote

So, does the salary expense go to operating expense or cost of revenue ?

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himishim t1_iu4plmv wrote

Depends on how Apple treats it. The statements provided to the public were at the level represented here which is a high level.

It probably is a mix of both though. So, the labour element of the cost can have an element that is direct to the sales - I would say if they have a factory to produce iPhones - the individuals working in the assembly line would form the cost that is within the cost of revenue value shown. However, individuals such as more senior managers/ support staff/ back office, etc which would not be directly associated with production would sit in the operating expenses value.

Obviously it all ends up being counted to get the net income but separating it properly does provide information on what adjustments can be made to manage costs and this structure of presenting things is carried out to follow required standards for those statements.

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