What type of costs vary directly with the level of output in a project?

The correct answer is direct costs, which are expenses that can be directly attributed to a specific project or activity. As the level of output increases in a project, such as the production of materials or the labor required to execute tasks, these costs will increase correspondingly. Examples of direct costs include materials, labor, and any other expenses that can be directly linked to the production of a specific quantity of work.

In contrast, indirect costs are not tied directly to a single project and do not vary with output levels in the same way; instead, they include general expenses such as administration and utilities. Fixed costs remain constant regardless of the level of output; these are expenses that do not change with the volume of production, such as rent or salaries of permanent staff. Overhead costs typically include indirect costs and are incurred to support the entire operation, regardless of how much project work is done.