Which type of costs includes materials, labor, and utilities?

The correct answer is direct costs because this category specifically encompasses expenses that can be directly attributed to the production of goods or services. Direct costs include materials, labor, and utilities specifically utilized in the production process. This means that for every product made or service rendered, these costs can be directly tracked and measured, making them essential for accurate costing and pricing strategies.

In contrast, indirect costs are expenses that cannot be directly traced to a specific product or service, such as administrative salaries or rent. Variable costs fluctuate based on production levels, like raw materials that vary with the number of units produced. Overhead costs refer to the ongoing expenses involved in operating a business that are not directly tied to creating a product or service, which often include indirect costs such as rent and utilities not tied directly to production. Therefore, direct costs are the appropriate choice for this question, as they directly relate to the production factors specified.