Question

What do you understand by semi-variable cost? Explain with the help of an example.

Answer 1

A semi-variable (mixed) cost is an expense that has both a fixed element and a variable element. A part of the cost remains fixed even when there is no production, while the remaining part varies with the level of activity or output. Examples: Telephone expenses (fixed rental plus call charges) and a salesperson’s salary (fixed salary plus commission).