7
QuizMultiple Choice

Budgeting — Quiz

Question 7 • Economics

What is most likely the reason variable expenses should be planned after fixed expenses?

Answer
A
Fixed expenses are required and constant, but variable expenses are more flexible.
B
Variable expenses are a necessary part of fixed expenses but can only be calculated after fixed expenses.
C
Variable expenses are almost always higher than fixed expenses and need a greater budget.
D
Fixed expenses are deducted from gross income, and variable expenses come from net income.

Explanation

Fixed expenses, such as rent or loan payments, are usually required and stay about the same each month. After setting aside money for those obligations, you can plan variable expenses, such as groceries or entertainment, which are more flexible and can be adjusted to fit the remaining budget. Choice A gives this reason; variable expenses are not necessarily higher than fixed expenses.

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