Which definition correctly describes variable expenses?

Variable expenses are best described as expenses that fluctuate based on the level of occupancy of a building. This means that as the number of tenants or the usage of the property changes, the incurred costs will also change. For example, in a rental property, utility costs or maintenance expenses may increase with higher occupancy rates as more tenants lead to greater use of resources.

The other definitions provided do not capture the essence of variable expenses. Fixed costs, for example, remain constant regardless of occupancy levels, which directly contrasts with the concept of variable expenses. Similarly, expenses tied exclusively to management fees would not encompass the broader range of costs that can vary with occupancy. Therefore, understanding that variable expenses shift with occupancy is key to effectively managing a property’s financial health. Thus, the correct identification of variable expenses allows for better budgeting and financial planning in property management.