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Explain fixed, variable and semi-variable costs.
Fixed Cost is the cost which remains constant or unaffected by variations in the volume of output within a given period of time. Example: Rent or rates, Insurance charges, etc.
Variable Cost is the cost which varies directly in proportion with every increase or decrease in the volume of output with a given a period of time. Example: Wages paid to labours, cost of direct material, consumable stores, etc.
Semi-variable Cost is the cost which is neither fixed nor variable in nature. These remain fixed at certain level of operations while may vary proportionately at other levels of operations. Example: maintenance cost, repairs, power, etc.
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