In the context of variable costs, which is an example of a cost that can be managed by production levels?

Raw materials costs are a prime example of a variable cost that can be managed by production levels. In production processes, the amount of raw materials needed directly correlates with the volume of products being manufactured. This means that if production increases, the usage of raw materials will increase proportionately, leading to higher costs. Similarly, if production decreases, less raw material will be required, resulting in lower costs. This flexibility makes raw materials a controllable expense based on production demands.

In contrast, costs such as rent for factory space, insurance premiums, and employee salaries are typically fixed costs that do not change with the level of production. For instance, rent and insurance must be paid regardless of how much the factory produces, while salaries for employees may not vary directly with production levels unless they are part of a commission structure or paid hourly based on output. Therefore, raw materials are distinct in that they can be adjusted in response to production needs, making them directly manageable.