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.
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Cached on May 23, 2012, 9:38 am