Which of the following best describes variable costs?

Variable costs are defined as costs that change in direct relation to the level of output produced by a business. This means that when production increases, variable costs also increase, and when production decreases, variable costs decrease as well. Common examples of variable costs include costs for raw materials, direct labor, and utility expenses that vary with production levels.

In contrast, costs described as remaining constant regardless of output pertain to fixed costs, which do not fluctuate with production volume. Costs associated with the initial setup of a business refer to startup expenses, which typically do not change with output levels either. Finally, fixed costs are those that must be paid regardless of the production level, further emphasizing the distinction between fixed and variable costs. Therefore, the accurate characterization of variable costs as those that change as output changes confirms the validity of the chosen answer.