Question

Explain Fixed, Variable And Semi-variable Costs?

Answer 1

fixed costs means the cost of expenses remain constant irrespective of the level of production..

ex .rent payable remains constant irrespective of production..

variable costs means these costs will change with the change in level of production...

ex.costs incurred for raw materials purchases ..

semi-variable costs are the combination of fixed and variable costs..

ex.Commissions are a semi-variable labor costs. They are usually percentages of sales that are paid to the employee who made the sale. In these cases, the salesperson earns a consistent base pay, which is a fixed cost. But their commission pay is variable since it’s dependent on the business’s sales, so when it’s combined with their base pay, you have a semi-variable cost.