Q.What is a Semi-Variable (Semi-Fixed) Cost? Give two examples and explain briefly why such a cost cannot be classified purely as fixed or purely as variable.

A Semi-Variable Cost is one cost head that is really made up of two different behaviours mixed together — part fixed, part variable — which is exactly why it resists a single, clean classification.

A Semi-Variable Cost (also called a Semi-Fixed Cost) is a cost that contains BOTH a fixed element and a variable element within the same single cost head. Part of the cost must be incurred regardless of the level of activity (the fixed component), while another part of the SAME cost head rises or falls as activity changes (the variable component).

Examples:

1. Telephone bill — a fixed monthly rental is payable whether or not any calls are made at all; on top of this, call charges rise with the number and duration of calls actually made.
2. Electricity bill — a fixed minimum/demand charge is payable simply for having the connection, regardless of units consumed; on top of this, a per-unit consumption charge rises with the actual electricity used. …

Students sometimes classify a semi-variable cost as simply 'fixed' because a large part of the bill looks stable, or as simply 'variable' because the bill amount changes month to month — both miss the point that BOTH a genuinely fixed floor amount AND a ge …