Commercial Applications
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.
- 1 & 2
- Only 4
- Only 1
- 3 & 4
Cost
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Answer
Only 4
Reason — Semi-variable (mixed) costs are partly fixed and partly variable — that is, they contain both a fixed component (for providing capacity) and a variable component (for using the capacity). For example, a telephone bill has a fixed monthly rent plus variable call charges. Statement 1 describes purely fixed costs, statement 2 contradicts the very meaning of "semi-", and statement 3 is incorrect because semi-variable costs occur in all industries.
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