A common example of a semivariable cost is the annual cost of operating a vehicle. Some of the vehicle's operating costs will vary with the number of miles driven while other costs will be the same in total regardless of the miles driven. For example, the vehicle's fuel costs will be variable. However, the depreciation, insurance and licensing may be fixed. Looking only at the vehicle's maintenance costs may indicate that some maintenance is done each November (regardless of the number of miles driven) while other maintenance is done every 6,000 miles.
A manufacturer's electricity cost is another example of a semivariable cost. Part of the monthly electricity bill will include 1) a fixed amount, and 2) a separate amount based on the number of kilowatt hours of electricity actually used by the company.
The manufacturer's electricity cost is also a semivariable cost in relationship with the company's machine hours. The portion of the electricity cost used to operate the production equipment is variable, but the portion of the electricity cost used for lighting and air conditioning the manufacturing facility is a fixed cost.
These simple examples illustrate that it can be difficult to understand how costs behave. There are many factors, activities, and drivers that influence the level of costs.
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