A salesman of a company dealing in pet foods is paid a fixed salary of Rs 30000 per month and furthermore, Rs 20 extra per unit of the product sold beyond the target sales. Identify the type of cost being described in the given example.

Fixed Variable Semi Variable Can be variable or Semi Variable

Semi Variable

Semi variable costs are those costs which vary with the level of activity but not in direct proportion with it. For example, compensation of a sales person may include a fixed salary of say Rs. 10,000 plus a commission of 5 per cent on sales. With an increase in the volume of sales, the total compensation will increase but not in direct proportion with the change in the volume of sale. Total Costs are the sum total of the fixed, variable and semi-variable costs for the specific level of activity, say volume of sales or quantity produced.