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

Variable costs are those expenses that fluctuate in direct relation to the level of production or business activity. They increase or decrease depending on the volume of goods produced or services provided. Utility expenses serve as an example of a variable cost because they can vary significantly based on usage. For instance, if a company increases its manufacturing output, it typically consumes more electricity and water, leading to higher utility bills. This direct link between the cost and production level exemplifies the characteristics of a variable cost.

In contrast, insurance, lease payments, and property taxes are typically classified as fixed costs because they remain constant regardless of the company's level of production or business activity, leading to their exclusion from the category of variable costs.