Entrepreneurship and Small Business (ESB) Certification Practice Exam

Credit card bills are generally categorized as what type of cost?

1. Fixed cost

2. Variable cost

3. Overhead cost

4. Non-operational cost

The correct answer is: Variable cost

Credit card bills are best categorized as variable costs because they can fluctuate from month to month based on the spending habits of the cardholder. Unlike fixed costs, which remain constant regardless of business activity, such as rent or salaries, variable costs change with the volume of business or usage. Since credit card bills can vary depending on purchases, interest charges, and fees incurred, they are directly linked to the level of activity associated with the credit card usage. This variability makes them distinct from fixed and overhead costs, which do not change in response to spending patterns. Non-operational costs typically refer to expenses that are not directly related to the core business functions, further differentiating credit card bills as a variable expense.