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
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.
Related Questions
An example of a production overhead would be ……………
- Material
- Rent
- Labour cost
- Supervisory cost
A cost that is easily traceable to a cost object is known as ……………
- Direct cost
- Indirect cost
- Variable cost
- Fixed cost
Fixed cost is a cost which remains same at ……………
- All levels of output
- Even zero level of output
- Both (A) and (B)
- Neither (A) nor (B)
Direct cost increases when ……………
- Sales price of product increases
- Cost of raw material increases
- Tax increases
- Subsidy increases