Accredited Residential Manager (ARM) Certification Practice Exam

Variable costs are defined by their behavior in relation to the level of activity or usage within property management. They fluctuate based on how much activity is taking place. For example, costs related to utilities, maintenance, and supplies may increase or decrease depending on the occupancy rates of the property or the extent of services utilized.

When a property has higher occupancy, variable costs like water and heating may rise due to increased consumption. Conversely, these costs would tend to decrease when occupancy is lower. This direct relationship between variable costs and usage helps property managers predict expenses more accurately, allowing for better budgeting and financial planning.

Understanding that these costs are not fixed, but rather interconnected with the property's operational activities, is essential for effective financial management in property operations. This characteristic distinguishes variable costs from fixed costs, which remain constant regardless of the level of activity.