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    Question

    Which of the following is an example of a semi-variable

    cost?  
    A Factory building rent paid on monthly basis Correct Answer Incorrect Answer
    B Electricity bill of minimum connection charge plus usage-based charges Correct Answer Incorrect Answer
    C Sales commission paid monthly based on units sold in the month Correct Answer Incorrect Answer
    D Direct material cost incurred on purchase of material Correct Answer Incorrect Answer
    E Supervisor’s monthly salary paid as per the stated CTC Correct Answer Incorrect Answer

    Solution

    A semi-variable cost has both a fixed and a variable component.    The minimum  connection  charge for the electricity bill is the fixed portion, while the charge based on consumption is the variable portion.  T herefore, it changes partly with activity level and partly remains constant  making it a  semi-variable cost.     Note –  

    • Rent  cost is  fixed  
    • Direct material   is  variable  
    • Salary)  is  fixed  cost  
    • Commission per unit  is a variable cost  

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