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

Which of the following is an example of a variable expense?

1. Property taxes

2. Insurance payments

3. Utilities costs

4. Depreciation

The correct answer is: Utilities costs

Utilities costs represent a variable expense because they fluctuate based on usage and occupancy levels. Unlike fixed expenses like property taxes and insurance payments, which remain constant regardless of the property’s occupancy or operational changes, utilities can vary significantly from month to month. For example, during the summer months, air conditioning usage may lead to higher electricity bills, while winter may bring increased heating costs. This variability closely ties utility costs to the actual consumption and can change depending on the number of residents in a property, making it a prime example of a variable expense. In contrast, property taxes and insurance payments remain stable over time and are predictable expenses. Depreciation, while it represents a cost related to the property’s value over time, is typically treated as a non-cash expense and is also fixed, calculated based on the property's original cost rather than actual usage.