Variable costs vary with activity level in transport operations

Steps:

• Define variable costs as those that change directly with the volume of transport services provided, like distance driven or trips completed.
• Analyze each option based on whether it fluctuates with operational output.
• Eliminate fixed costs that remain constant regardless of activity.
• Confirm the option that scales with mileage or usage.

Why C is correct:

• Fuel is a variable cost because it increases proportionally with the distance traveled or vehicles operated, per the definition of variable costs in cost accounting.

Why the others are wrong:

• A. Advertising is a fixed cost, incurred periodically regardless of transport volume.
• B. Driver insurance is a fixed cost, paid as a premium not tied to activity levels.
• D. Vehicle licence is a fixed cost, renewed annually irrespective of usage.

Final answer: C