Question

Which of Ahmad’s expenses will most likely be ranked as variable expenses? Check all that apply.

1) rent
2) discretionary spending
3) groceries
4) health insurance
5) electricity bill
6) water bill

ANSWER: 2,3,5,6

Answer 1

2) discretionary spending
3) groceries
5) electricity bill
6) water bill
is correct

Answer 2

The following expenses are considered variable expenses:

• Discretionary spending
• Groceries
• Electricity bill
• Water bill

Variable expenses are defined in contrast to fixed expenses. The first represent those costs which can change from one month to the next, or from one year to the next, depending on the use you make from the product or service they are linked to. Variable expenses are not necessarily discretionary, in fact many are not because you cannot live without them.

In opposition, fixed costs would be those whose quantity remains equal during the time the contract lasts, for example, in the case of the rent.