Question

What do you mean by Semi-Fixed cost?

Explain the following:

Semi-fixed costs

Explain semi-variable cost with suitable example.

Answer 1

1. Semi-fixed costs are those costs which vary but not in direct proportion to changes in the volume of production.
2. They are a combination of fixed and variable costs. In other words, semi-fixed costs are partly fixed and partly variable.
3. Such costs are neither perfectly fixed nor absolutely variable.
4. The fixed component of such costs represents the cost of providing capacity, and the variable component is caused by using the capacity.
5. For example, the rent of a telephone is a fixed cost, whereas the charges for calls made during a month are a variable cost.