Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

Which of the following are considered examples of variable expenses?

1. Utilities, marketing, and payroll taxes

2. Fixed mortgage payments and property taxes

3. Depreciation and insurance

4. Furniture purchases and large capital improvements

The correct answer is: Utilities, marketing, and payroll taxes

Variable expenses are costs that fluctuate based on the level of activity or occupancy within a property. The selection of utilities, marketing, and payroll taxes as variable expenses is accurate because their costs can change with factors such as consumption levels, the effectiveness of marketing strategies, and the number of employees required at different times. For example, utility costs often increase with higher occupancy and usage, marketing expenses can vary based on promotional campaigns, and payroll taxes might change with staff levels. In contrast, fixed mortgage payments and property taxes remain constant regardless of occupancy rates, making them fixed expenses. Depreciation and insurance are also considered fixed costs because they do not vary with the level of business activity. Additionally, large capital investments, such as furniture purchases and significant improvements, represent one-time, infrequent costs rather than ongoing variable expenses. Understanding these distinctions helps in effective financial planning and management within property operations.