In engineering economics, which of the following are costs that vary directly with the level of output?

The correct choice is variable costs, which are characterized by their direct correlation with the level of output. As production levels increase or decrease, variable costs fluctuate accordingly. These costs include expenses such as raw materials, direct labor, and utilities that are used in the manufacturing process and increase with higher production volumes.

In contrast, fixed costs remain constant regardless of production levels, meaning they do not vary with output changes. Examples of fixed costs include rent, salaries of permanent staff, and equipment leases. Operational costs can include both variable and fixed costs, making it a broader category but not specifically tied to production variability. Rental costs usually refer to fixed expenses associated with leasing property or equipment, which also do not fluctuate based on output levels.

Understanding the distinction between variable and fixed costs is crucial in engineering economics, as it affects cost behavior analysis, pricing strategies, and overall financial management.