Semi-variable costs
In one sentenceCosts with a fixed part paid regardless of activity and a part that rises with use, such as a mobile bill with a monthly fee plus extra minutes.
Simply put
They are also called mixed costs. Electricity in a factory is a clear example: a fixed part for lighting and air conditioning, and a part that rises the more you run the machines.
To calculate the break-even point or build a flexible budget, you must split them into their two parts: the fixed part goes with fixed costs, and the variable part with variable costs.
Worked example
A factory estimates its monthly electricity at 1,500 SAR fixed plus 0.5 SAR per unit produced (illustrative figures). It produced 4,000 units.
Fixed part1,500 SAR
Variable part = 4,000 × 0.52,000 SAR
Electricity bill = 1,500 + 2,0003,500 SAR
Formula: Fixed part + (Variable rate × Activity level)
Don't confuse it with
Fixed costsFixed costs do not change in total with activity at all, while semi-variable costs have a part that changes.