CMA Foundation · Fundamentals of Financial and Cost Accounting · Classification of Costs (CAS 1)
A telephone bill of Anjali Traders consists of a fixed line rental of ₹900 per month plus ₹2 per call. How should this cost be classified, and what is the bill for 350 calls?
It is a semi-variable cost, and the bill for 350 calls is ₹1,600. The fixed rental of ₹900 is payable regardless of use, and the variable part is 350 calls at ₹2, which equals ₹700; together they total ₹1,600.
- AVariable cost; ₹700
- BSemi-variable cost; ₹1,600Correct
- CFixed cost; ₹900
- DSemi-variable cost; ₹1,800
Explanation
The bill has a fixed element and a usage-linked element, so it is semi-variable. Cost = 900 + 2×350 = 900 + 700 = ₹1,600. ₹700 ignores the fixed rental, and ₹1,800 wrongly applies ₹2 to a base that includes the rental.
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