Which of the following is an example of a variable cost?

The example of a variable cost provided in the answer refers to direct materials used in production, which is correct because variable costs fluctuate based on the level of production activity. As production increases, the quantity of direct materials needed also increases, leading to higher costs. Conversely, if production decreases, the costs for direct materials will decrease as well. This direct relationship between production levels and the cost of direct materials is a defining characteristic of variable costs.

In contrast, rent for factory space, salaries of permanent staff, and depreciation on machinery are classified as fixed costs. These costs do not vary with production volume; they remain constant regardless of how much product is manufactured. Rent is a predetermined amount that does not change with output, salaries of permanent staff are consistent regardless of production level, and depreciation is a method of allocating the cost of tangible assets over their useful lives, which remains fixed during that period. Hence, in understanding cost behavior, direct materials epitomize a true variable cost, demonstrating the practical application of this concept within managerial accounting.