Question

A company's telephone bill consisting of a Rs 200 monthly base amount, plus long distance charges, would be classified as a _____________.

• A. Variable cost
• B. Committed fixed cost
• C. Direct cost
• D. Semi-variable cost

Answer 1

Answer: (D)

Semi-variable cost

Expense can be classified as:

Variable Expense- Which increases or decreases with the volume of activity.

Fixed Expenses- Fixed in term of value and does not change with the volume of activity.

Semi- Variable Expenses- These expenses are fixed till a particular level thereafter changes with the volume. Telephone expenses to the extent of Rs.200 is fixed and thereafter variable, hence its a semi- variable cost.