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

Variable costs are expenses that change in direct proportion to the level of production or business activity. They increase as production rises and decrease when production falls, making them directly responsive to the operational dynamics of a business.

Fertilizers and chemicals serve as an excellent example of a variable cost because their usage correlates with the volume of agricultural production. For instance, a farmer will purchase more fertilizers and chemicals when planting more crops or expanding operations but can reduce that amount if they produce fewer crops or when restructuring their cultivation strategies. This illustrates how these costs fluctuate with production levels.

In contrast, property taxes, insurance premiums, and salaries for permanent staff are considered fixed costs. Property taxes and insurance premiums generally remain constant regardless of the level of output, while salaries for permanent staff are typically paid consistently regardless of fluctuations in production, marking them as fixed, rather than variable, costs.