Semi variable cost

Semi variable cost

Semi variable cost is an expense which contains both a fixed cost component and a variable cost component. The fixed cost element shall be a part of the cost that needs to be paid irrespective of the level of activity achieved by the entity. On the other hand the variable component of the cost is payable proportionate to the level of activity.

It shows similarities to telephone bills. One must pay line rental and on top of that a price that depends on how heavy one is using the service. So it changes with output. Another example is satellite television. A price for the box must be paid monthly and to get additional movies, more money has to be given.

Cost of energy, such as electricity, is a good example as it is integral to production of goods and services. This component straddles both the fixed and variable universe because electrical power is essential for the basic operation of the business in lighting and heating - this portion is a sunk cost that is foregone regardless of production. As demand ramps up, more energy is required to ramp up the production process in the use of machinery or large banks of computers for instance. Cost of electrical energy will then rise accordingly as production activities increase. Therefore, the cost electricity can be viewed as semi variable.

Another example is salaried employees who are also compensated by commissions. This group is paid on a fixed salary plus they are also rewarded based on the volume of sales they can generate, or, other forms of quantitative measures based on revenues to the firm.


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  • semi-variable cost — /ˌsemi ˌveəriəb(ə)l kɒst/ noun money paid to produce a product which increases, though less than proportionally, with the quantity of the product made ● Stepping up production will mean an increase in semi variable costs. Also called semi fixed… …   Dictionary of banking and finance

  • semi-variable cost — /ˌsemi ˌveəriəb(ə)l kɒst/ noun money paid to produce a product which increases, though less than proportionally, with the quantity of the product made ● Stepping up production will mean an increase in semi variable costs …   Marketing dictionary in english

  • Semi-Variable Cost — A cost composed of a mixture of fixed and variable components. Costs are fixed for a set level of production or consumption, becoming variable after the level is exceeded. Also known as a semi fixed cost. This type of cost is variable in the… …   Investment dictionary

  • semi-variable cost — An item of expenditure that contains both a fixed cost element and a variable cost element. Consequently, when activity is zero, the fixed cost will still continue to be incurred. For example, in the UK the cost of gas is made up of a standing… …   Accounting dictionary

  • semi-variable cost — An item of expenditure that contains both a fixed cost element and a variable cost element. Consequently, when activity is zero, the fixed cost will still continue to be incurred. For example, in the UK the cost of gas is made up of a standing… …   Big dictionary of business and management

  • semi-variable cost — An item of expenditure that has elements of both *fixed and *variable costs. For example, the cost of gas supply tends to comprise a fixed charge, irrespective of the level of usage, and a variable element linked to the level of consumption …   Auditor's dictionary

  • semi-fixed cost — /ˌsemi fɪkst kɒst/ noun same as semi variable cost …   Dictionary of banking and finance

  • semi-fixed cost — An alternative term for *semi variable cost …   Auditor's dictionary

  • Variable cost — Decomposing Total Costs as Fixed Costs plus Variable Costs. Variable costs are expenses that change in proportion to the activity of a business.[1] Variable cost is the sum of marginal costs over all units produced. It can also be considered… …   Wikipedia

  • variable cost — An item of expenditure that, in total, varies directly with the level of activity achieved. For example, direct materials cost will tend to double if output doubles, a characteristic being that it is incurred as a constant rate per unit. In… …   Accounting dictionary

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