As the level of business activities changes, part costs adjust while others execute not. The an answer of a price to a change in business activity is well-known as cost behavior. Managers should be able to predict the behavior of a details cost in an answer to a adjust in certain business activity. Because that this purpose, costs are classified together variable, fixed and also mixed costs. This write-up explains these three species of costs and also their an answer to service activities.

You are watching: A cost that has characteristics of both a variable cost and a fixed cost is called a

Variable cost:

A cost that changes, in complete dollar amount, with the readjust in the level of task is called variable cost. A usual example the variable cost is direct materials cost. Think about the following example to understand how variable price behaves in a manufacturing company.

A mobile phone call manufacturing firm purchases speaker from another company at a expense of $2 every speaker. The speaker is a direct materials expense for mobile phone manufacturing company. One speaker is used to finish a mobile phone. The total and per unit expense of speaker at assorted levels of task is offered below:

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Notice the the full cost the speakers rises as the mobile phones created are increased yet per unit cost remains constant.

Other instances of variable price include lubricants, sales commission and shipping prices etc.


A D V E R T ns S E M E N T

Fixed cost:

A cost that does no change, in total, v the readjust in task is called fixed cost. A usual example of fixed cost is rent. In above example, if mobile call manufacturing firm rents a building for its factory for $5,000 every month, that will have to pay $5,000 because that every month also no mobile call is created during the month. The habits of fixed cost is displayed in the complying with figure:

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Total fixed cost does not adjust with the change in task but per unit fixed cost alters with the rise and fall in the level the activity. There is an station relationship in between per unit addressed cost and also activity. If manufacturing increases, per unit fixed expense decreases and also if manufacturing decreases, every unit fixed cost increases. To know this point, we have the right to use the data indigenous the over example that mobile manufacturing company. Think about the adhering to table:

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Notice that average fixed price (computed in the critical column) decreases together the manufacturing of mobile phones increases. It is an interesting property of solved cost.

Mixed or semi-variable cost:

A price that has the characteristics of both variable and fixed expense is dubbed mixed or semi-variable cost. For example, the rental dues of a an equipment might encompass $500 every month to add $5 per hour the use. The $500 per month is a fixed cost and also $5 every hour is a variable cost. One more example of combined or semi-variable price is electricity bill. The electricity bill have the right to be separated into two parts – (1) a resolved line rent and (2) expense of devices of power consumed. The heat rent continues to be fixed and also is not affected by the intake of electrical power whereas the expense of units consumed varies v the change in systems consumed.

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Three typically used techniques to separated a blended or semi-variable cost into that fixed and also variable contents are high-low suggest method, scatter graph technique and least squares regression method.