Question

Salesman commission is a semi-variable cost, also known as a mixed cost. Explain with an example.

Answer 1

1. The commission paid to a salesman is a semi-variable (or mixed) cost. This is because it usually has a set component (base wage) and a variable component (commission based on sales performance). The fixed portion doesn’t fluctuate with sales volume, but the variable portion increases with higher sales, so it is semi-variable.
2. Partly variable cost is also called mixed cost or partly fixed cost. Semi-variable cost is an expense that has a fixed and a variable component.
3. It is a cost that includes both fixed cost components, which remain constant over a range of activity, and variable cost components, which fluctuate with the amount of activity.
4. For example, with telephone costs, the base rental rate is constant, but call charges are changeable.