HISET Social Studies Practice

Which type of expense is commonly associated with variable costs?

1. Fixed Expense

2. Required Expense

3. Flexible Expense

4. Mandatory Expense

The correct answer is: Flexible Expense

The correct choice is flexible expense, which relates closely to variable costs. Variable costs are expenses that change in direct proportion to the level of production or sales. For example, in a manufacturing context, costs for raw materials and labor can fluctuate depending on how much product is being produced. Since flexible expenses can adjust according to business activity, they align well with the nature of variable costs, which rise and fall based on operational needs. The other types of expenses—fixed expenses, required expenses, and mandatory expenses—do not share this characteristic. Fixed expenses remain constant regardless of business activity, while required and mandatory expenses typically refer to necessary costs that do not vary with production. Thus, while they are important in their own right, they do not accurately describe the nature of variable costs.