Florida General Contractor Practice Exam

Which of the following is an example of a variable expense in construction?

1. Monthly rent for office space

2. Insurance premiums

3. Labor costs

4. Property taxes

The correct answer is: Labor costs

Labor costs are classified as variable expenses in construction because they can fluctuate based on the amount of work done, the specific projects undertaken, and the number of workers needed at any given time. Unlike fixed expenses, which remain constant regardless of the level of production or activity (like rent or insurance premiums), labor costs can vary significantly from month to month or project to project based on the labor required. In contrast, the other options represent fixed expenses. Monthly rent for office space, while it might change if you move or negotiate a new lease, generally remains consistent over the lease term. Insurance premiums are typically stable unless there is a significant change in coverage requirements or risk factors. Property taxes are generally assessed on a yearly basis and do not fluctuate with project volume or activity levels. Thus, labor costs distinctly embody the nature of variable expenses, aligning them with the typical patterns of fluctuations seen in construction project demands.