Variable expenses are expenses that can fluctuate over time, making them more difficult to budget and predict than fixed expenses. Fixed expenses are those that remain constant and predictable, and are often used as the basis for budgeting and planning. Examples of variable expenses might include utilities, transportation costs, or raw materials, while examples of fixed expenses might include rent or salaries. By understanding the difference between fixed and variable expenses, organizations can better manage their resources and make more informed decisions.
Business
In the context of business, a variable expense is most commonly an expense that rises with production levels. Variable expenses also include strategic initiatives such as a project that is expensed. Variable expenses can be contrasted with overhead such as the cost of your HR team that doesn’t change with your business volumes or strategy. Some types of taxes such as property tax are typically a fixed expense. Income tax tends to be highly variable according to income and expenses.
- Advertising
- Bad Debt Expense
- Commissions
- Components
- Consulting
- Cost of Goods Sold
- Delivery
- Direct Labor
- Electricity
- Foreign Exchange Loss
- Freight Inventory
- Marketing Expenses
- Materials
- Professional Fees
- Strategic Initiatives
- Subcontracts
- Supplies
- Taxes
- Travel Expenses
Personal
Personal variable expenses includes costs that are discretionary, unpredictable, one-time, unusual or that go up and down according to usage. These can be budgeted for with categories such as contingency and discretionary. In many cases, it is possible to convert a variable cost into a fixed cost. For example, insurance that covers medicine. It is also common for services to offer fixed rate pricing such as a streaming media service that offers entertainment for a fixed monthly fee.
- Appliances
- Bedding
- Clothing
- Disasters (e.g. Flood Damage)
- Electronics
- Energy & Fuel
- Entertainment
- Eye Care
- Food
- Footwear
- Furniture
- Haircare
- Home Furnishings
- Internet & Communications
- Luxuries
- Medicine
- Out-of-pocket Medical
- Repair
- Restaurants
- Toiletries
- Travel
- Utilities
- Vacations
