A sales manager's salary is ₹50,000, but he also receives a 2.5% commission if the sale increases from 3,500 units. Identify the type of cost highlighted here.
Answer & explanation
Correct answer: option 3
The correct answer is option 3- Semi-variable cost.
A semi-variable cost includes both a fixed component (e.g., the manager's fixed salary of ₹50,000), and a variable component (e.g., 2.5% commission on sales exceeding 3,500 units). Since the total cost changes partially with the level of activity, it's not entirely fixed or variable hence, semi-variable.