Operating costs are the expenses associated with running a business. They include salaries, payroll taxes, rent, utilities, inventory and other supplies necessary to keep the business operating on a day-to-day basis. Operating costs are typically divided into two categories: fixed costs such as rent and utility bills, which remain unchanged regardless of how much product is produced; and variable costs such as materials and labor, which fluctuate in proportion to how much product is sold. By accurately tracking and managing their operating costs, businesses can ensure they stay profitable while still providing quality products or services to customers.