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Questions
What do you mean by Semi-Fixed cost?
Explain the following:
Semi-fixed costs
Explain semi-variable cost with suitable example.
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Solution
- Semi-fixed costs are those costs which vary but not in direct proportion to changes in the volume of production.
- They are a combination of fixed and variable costs. In other words, semi-fixed costs are partly fixed and partly variable.
- Such costs are neither perfectly fixed nor absolutely variable.
- The fixed component of such costs represents the cost of providing capacity, and the variable component is caused by using the capacity.
- For example, the rent of a telephone is a fixed cost, whereas the charges for calls made during a month are a variable cost.
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