Differences between operating expenses and cost of goods sold (COGS)
If you picture a warehouse full of goods, the cost of goods sold includes all of the money spent to create the goods and bring them to the warehouse. The operating expenses represent the other day-to-day expenses necessary to keep the business running.
Payroll can actually be either type of expense depending on the labor involved. For instance, office payroll might include a secretary, an accountant, marketing specialists or janitorial workers. All of these salaries are included as operating expenses, while a commissioned salesperson or assembly line autoworker is directly working towards the saleable consumer good and therefore is included in the cost of goods sold expense.
