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Questions
"Some costs are semi-variable in nature." Comment.
Some costs are semi-variable in nature. Justify either for or against.
Answer in Brief
Solution
- Definition: Semi-variable costs, often called mixed costs, include both fixed and variable components.
- Fixed Component: Part of the cost is constant, independent of production or activity.
- Variable Component: Part of the cost fluctuates according to output volume or activity level.
- Example: Utility bills frequently include a fixed base price and a variable charge based on usage.
- Behaviour: Semi-variable expenses fluctuate in total but not proportionally to changes in output or activity levels.
- Management: Understanding semi-variable costs is critical for budgeting, forecasting, and decision-making.
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Classification of Costs
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