Semi variable expenses

A semi-variable cost has characteristics of both fixed costs and variable costs once a specific level of output is surpassed.

For example, if a company owns a production line, the total cost of that equipment in a month is a semi-variable cost. The depreciation associated with the asset is a fixed cost, since it does not vary from period to period, while the utilities expense will vary depending upon the amount of time during which the production line is operational. The fixed cost of the production line is Rs.10,000 per month, while the variable cost of utilities is Rs.150 per hour. If the production line runs for 160 hours per month, then the semi-variable cost calculation is:

Rs.34,000 Total cost = Rs.10,000 fixed cost + (Rs.150/hour x 160 hours)

Variable costs are corporate expenses that vary in direct proportion to the quantity of output. Unlikefixed costs, which remain constant regardless of output, variable costs are a direct function of production volume, rising whenever production expands and falling whenever it contracts. Examples of common variable costs include raw materials, packaging, and labor directly involved in a company's manufacturing process.