A businesss telephone bill should normally be classified into which one of the following categories?
A
Fixed cost
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B
Stepped fixed cost
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C
Semi-variable cost
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D
Variable cost
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Solution
The correct option is B Semi-variable cost Semi -variable cost is a combination of fixed cost and variable cost. Up to a certain level the cost is fixed and thereafter it increases with the volume.
Telephone bills typically having a fixed rental and certain free calls, thereafter every call is chargeable. Hence this is an example of semi-variable cost.