Those variables are shell variables. To expand them as parameters to another program (ie expr), you need to use the $ prefix:
expr $x / $y
The reason it complained is because it thought you were trying to operate on alphabetic characters (ie non-integer)
If you are using the Bash shell, you can achieve the same result using expression syntax:
echo $((x / y))
Or:
z=$((x / y))
echo $z