Which of the following is an example of variable costs?

Variable costs are those expenses that fluctuate based on the level of production or sales volume. They tend to increase as production rises and decrease when production falls. Raw materials needed for production are a quintessential example of variable costs because their total cost changes directly with the amount produced. If a company produces more products, it will require more raw materials, thus incurring higher costs. Conversely, if production decreases, the need for raw materials diminishes, leading to lower costs.

In contrast, the other options listed are examples of fixed costs or semi-variable costs. Rent for office space and insurance premiums generally remain constant regardless of production levels, and salaries of permanent staff are typically set amounts that do not fluctuate based on the company's output. Understanding variable costs is essential in managing a small business's finances efficiently, as they directly impact the overall profitability of the business based on production levels.