Which statement correctly describes a semivariable cost?

Which statement correctly describes a semivariable cost?

• A. Semivariable costs are fixed and never change
• B. Semivariable costs are purely variable with sales
• C. Semivariable costs change with volume but not in direct proportion; they have both fixed and variable elements
• D. Semivariable costs are always unpredictable

Answer: (C)

Semivariable costs, also called mixed costs, have two parts: a fixed portion that stays the same regardless of activity and a variable portion that increases with volume. Because of the fixed component, total cost does rise as activity grows, but not in a direct, one-to-one proportion to activity because the fixed amount adds a constant baseline. An example is a maintenance contract with a fixed monthly fee plus a charge per hour of service. This structure means the cost changes with volume, yet includes both fixed and variable elements. The other descriptions don’t fit because a purely fixed cost never changes, a purely variable cost moves in direct proportion with activity, and unpredictability isn’t a defining feature of semivariable costs.

Semivariable costs, also called mixed costs, have two parts: a fixed portion that stays the same regardless of activity and a variable portion that increases with volume. Because of the fixed component, total cost does rise as activity grows, but not in a direct, one-to-one proportion to activity because the fixed amount adds a constant baseline. An example is a maintenance contract with a fixed monthly fee plus a charge per hour of service. This structure means the cost changes with volume, yet includes both fixed and variable elements. The other descriptions don’t fit because a purely fixed cost never changes, a purely variable cost moves in direct proportion with activity, and unpredictability isn’t a defining feature of semivariable costs.