DECA Retail Merchandising Practice Exam

Operating expenses are primarily a result of which of the following?

1. Merchandise sales returns

2. Normal business operations

3. Asset depreciation

4. Inventory purchases

The correct answer is: Normal business operations

Operating expenses are primarily a result of normal business operations. These expenses include costs that a business incurs through its day-to-day activities, which can encompass rent, utilities, payroll, and administrative expenses. They are essential for maintaining the business's operations and do not include costs tied directly to the production of goods or services. Normal business operations refer to the activities that keep a company running smoothly, such as managing staff, maintaining premises, and handling logistical needs. Since operating expenses are critical to sustaining these everyday functions, identifying them as stemming from normal business operations makes sense. While asset depreciation, merchandise sales returns, and inventory purchases can affect a business's financial performance, they do not primarily classify as operating expenses. Depreciation relates to how a company allocates the cost of tangible assets over their useful lives, sales returns are typically seen as reductions to revenue, and inventory purchases represent costs associated with acquiring products for resale, which falls under cost of goods sold rather than operating expenses.