Question

Electricity bill is an example of-

• A. Fixed cost
• B. Semi-variable cost
• C. Variable cost
• D. Constant cost

Hint:

Fixed costs = Rent. Variable costs = Raw ingredients. Semi-variable = Utilities (Phone/Electricity).

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
Costs are classified by how they behave in relation to the volume of business or production.

Step 2: Detailed Explanation:
A Semi-variable cost is a cost that has both a fixed and a variable component.
Electricity bills usually include:
1. Fixed component: A monthly fixed charge (rent) for the meter/connection that you pay even if you use no power.
2. Variable component: The charge based on the units consumed, which increases as you use more ovens, lights, and appliances during busy periods.
Since it doesn't stay perfectly fixed and doesn't change perfectly in proportion to production, it is "semi-variable".

Step 3: Final Answer:
Electricity bill is a semi-variable cost.