Port Harcourt Refinery Limited produces refined petroleum products. In classifying costs for product costing under absorption costing, the royalty paid to a foreign licensor calculated at ₦50 per litre of refined output would be classified as:

The royalty of ₦50 per litre varies in direct proportion to output (variable behaviour) and can be directly traced and attributed to each litre of refined product (direct cost). A cost is direct if it is specifically identifiable with a cost unit without apportionment; since the royalty is calculated per litre of output, it is both variable and direct, making option C correct.