How is a variable expense characterized?

A variable expense is characterized by its fluctuation based on usage or activity levels. This type of expense changes in direct proportion to the level of production or business activity; for example, costs like raw materials, utility expenses, or sales commissions can increase or decrease depending on how much product is produced or sold.

This variability makes them different from fixed expenses, which remain constant regardless of the business's activity level. Understanding variable expenses is essential for businesses to effectively budget and forecast costs as they scale operations or fluctuate with demand.

The other descriptions do not accurately capture the nature of variable expenses: expenses that do not change regardless of business activity are fixed, consistent expenses imply a level of predictability at a set amount, and depreciation specifically relates to the allocation of the cost of fixed assets over their useful lives rather than variable expenditures.