Which of the following is a variable cost?

Hourly wages for an office employee are classified as a variable cost because they fluctuate based on the number of hours worked. In contrast to fixed costs, which remain constant regardless of the level of production or operational activity, variable costs change in direct proportion to the level of activity. For example, if an employee works more hours, their total wages increase, and if they work fewer hours, the wages decrease accordingly. This variability directly ties to operational needs, making hourly wages a clear example of a cost that varies with production or service levels.

In contrast, office rent and insurance premiums are typically fixed costs, as they do not change based on the level of activity within the business. Fixed salaries also belong to the category of fixed costs since they remain constant regardless of hours worked or production undertaken.