There are certain costs which are neither totally fixed nor fully variable. Justify for or against and give a reason.

FOR — The statement is correct. There are indeed certain costs which are neither totally fixed nor fully variable; these are called semi-fixed (semi-variable or mixed) costs.

Reason:

Semi-fixed costs are a combination of fixed and variable components. They have:

• A fixed component that represents the cost of providing capacity.
• A variable component that depends on the actual usage or level of activity.

Such costs vary with the volume of production but not in direct proportion to it. Hence they cannot be classified as purely fixed or purely variable.

Examples:

• Telephone bill — Fixed monthly rental + Variable call charges.
• Electricity bill — Fixed minimum charge + Variable consumption charges.

Therefore, the statement is justified — semi-fixed/semi-variable costs occupy the middle ground between fixed and variable costs.