## Definition

A Semi-Variable Cost can be defined as a cost that comprises both fixed and variable components. Also referred to as mixed costs, semi-variable costs tend to stay fixed for a given production level.

After a certain level of production, they then tend to vary with the output. Even in the case where the company has no production, these costs still incur.

Semi-Variable costs can broadly be categorized into two broad components: the fixed component and the variable component.

The fixed component is unrelated to the level of output at which the company is producing. In contrast, the variable component is directly contingent on the level of output at which the company produces. Both of these components (variable and fixed) are combined to arrive at the respective cost head.

## Formula

Total Semi-Variable Cost includes the following:

Total Semi-Variable Cost = Fixed Cost + (Variable Cost * Level of Output)

## How to calculate Semi Variable Cost?

As mentioned earlier, it can be seen that Semi-Variable Costs include a Fixed Cost component, as well as a Variable Cost Component. The following example can illustrate the calculation of Total Semi Variable Cost:

Roopi Ltd. It is a production concern, which has subscribed for the following electricity plan. They are charged a flat fee of \$500 line rent per month. Additionally, they are also charged on a per-unit consumption basis, and for units charged, they need to pay \$1 as a utility. In the last month, Roopi Ltd. consumed 2300 units. What is the total outstanding amount they need to pay?

The illustration above shows that the electricity charge for Roopi Ltd. can be considered a semi-variable cost simply because it includes a fixed component (the line rent per month) and the variable component (the per unit charge). Therefore, the total cost of electricity would be a summation of both these costs, as shown below:

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Electricity Cost = \$500 (Fixed Line Rent) + (1*2300) (Variable Charge) = 2800

In this example above, it can be seen that the line rent would be charged, regardless of any units of electricity being utilized or not. In the same manner, the variable charges are going to fluctuate based on the units that are consumed by the business over the billing period.