ACCA Applied Knowledge · Management Accounting · Cost classification
A company pays its sales staff a basic salary of $2,000 per month plus a commission of 3% of the value of sales made in the month. How would the total cost of sales staff pay be classified?
The pay is a semi-variable (mixed) cost because it combines a fixed monthly basic salary with a commission that varies with sales value. Part of the cost stays constant whatever the activity level, while the other part changes in proportion to sales.
- AFixed cost
- BVariable cost
- CSemi-variable (mixed) costCorrect
- DStepped fixed cost
Explanation
The pay contains a fixed element (the $2,000 basic salary) and a variable element (the 3% commission that changes with sales). A cost with both elements is semi-variable. Classifying it as variable ignores the basic salary that is paid regardless of sales.
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