A real-life example of a variable cost could be the cost of raw materials used in the production of a product. For instance, consider a company that manufactures bicycles. The cost of the raw materials used to make each bicycle, such as steel, rubber, and plastic, will vary based on the number of bicycles produced. If the company produces more bicycles, it will need to purchase more raw materials, and the cost of these raw materials will increase. Similarly, if the company reduces its production volume, the cost of raw materials will decrease accordingly. Therefore, the cost of raw materials is a variable cost, as it varies with the level of production.