How is the operating expense calculated in cash flow reports?

The calculation of operating expenses in cash flow reports often requires breaking down costs into fixed and variable components to accurately reflect how they contribute to overall expenses based on occupancy levels. The correct choice details a formula that aligns with this approach.

In the case of this specific calculation, you use a combination of fixed expenses, which remain constant regardless of occupancy, and variable expenses that fluctuate according to the level of occupancy. By applying the percentages for fixed and variable costs, along with the occupancy percentage, this method allows for a more nuanced understanding of operating expenses based on actual usage or occupancy levels.

This calculation is particularly useful in real estate or property management, where occupancy rates can significantly impact cash flows. Thus, the formula reflects a realistic approach to assessing operating expenses, taking into account both stable and fluctuating costs based on occupancy metrics.

Other options may simplify the concept too much or overlook the important distinction between fixed and variable costs, which could lead to misleading financial reports.