Question

What is a defining feature of semi-variable (mixed) costs?

1. They remain constant across various activity levels.
2. They solely consist of variable components.
3. They only apply to service industries.
4. They include both fixed and variable elements.

Options

• 1. & 2.

• Only 4

• Only 1.

• 3. & 4.

Answer 1

Only 4

Explanation:

Semi-variable costs, also known as mixed costs, are made up of a baseline fixed cost component and a usage-dependent variable cost component. A classic example is an industrial power bill, which includes a fixed line rental price that must be paid regardless of activity, as well as a variable rate that increases proportionally with production volume.