Which of the following costs increases as production increases and includes items like fertilizer and labor?

The correct choice is associated with costs that vary directly with the level of production. These costs are known as direct costs, which encompass expenses that can be directly attributed to the production of goods or services. Items such as fertilizer and labor are prime examples of direct costs, as they increase proportionally with the volume of production; more units produced will require more fertilizer and labor to maintain output.

In the context of production, understanding direct costs is crucial for effectively managing a business's budget and financial forecasting. By accurately identifying and monitoring these costs, a company can determine its break-even point and profitability.

Fixed costs, on the other hand, remain constant regardless of the level of production. Contingency costs refer to an estimated amount set aside for unforeseen expenses, while indirect costs are expenses that cannot be directly traced to a specific product but support operations overall, such as utilities and administrative salaries. Hence, these costs do not directly correlate with production levels in the same clear way that direct costs do.