Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Semi-Variable Cost

What it is:

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

How it works (Example):

Semi-variable costs remain fixed up to a particular production volume. Beyond this volume, semi-variable costs increase in direct proportion to output. Wages, for instance, are semi-variable costs which multiply by 1.5 beyond 40 hours worked in a given week (also called time-and-a-half).

Why it Matters:

Semi-variable costs are an important consideration for companies when planning output levels, because semi-variable costs may limit profitability at higher production levels and erode a company's bottom line.