ICAEW BIP · Chapter 1 · Question 3 of 10
A company's electricity bill consists of a fixed quarterly standing charge plus a charge for each unit of electricity consumed. How would this cost be classified by behaviour?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Semi-variable cost
Explanation
A cost with a fixed element (the standing charge) and a variable element (the charge per unit consumed) is a semi-variable, or mixed, cost. On a graph it starts above zero on the cost axis and then rises in a straight line as activity increases.
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