MI – Nov 2014 – L1 – SA – Q19 – Cost-Volume-Profit (CVP) Analysis

This question focuses on identifying the cost pattern that includes both fixed and variable components.

Question

The cost behavioral pattern which shows element of fixed and variable components is:
A. Variable cost
B. Standard cost
C. Full cost
D. Semi-variable cost
E. Fixed cost

Answer

D. Semi-variable cost

Explanation:
A semi-variable cost includes both a fixed and a variable component. Fixed costs remain constant up to a certain level of activity, after which variable costs increase with activity levels. This type of cost behavior is common in utilities like electricity, where there is a basic fixed charge plus an additional variable charge depending on usage.

Tags: Cost behavior, CVP Analysis, Fixed Costs, Semi-Variable Costs, Variable Costs
Level: Level 1

Topic: Cost-Volume-Profit (CVP) Analysis
Series: NOV 2014

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