Question

The following is an extract of a cost report for Sally Furniture Services (SFS) for three months from March to May. Management considers the activities in the SFS business are within the relevant range for the purpose of cost estimation.

        

Month	No. of Customers	Service cost
March	500	$7,600
April	520	$7,960
May	480	$7,200

The furniture service cost is a:

Select one:

a. Semi-variable (or mixed) cost

b. Fixed cost

c. Variable cost

d. Step-fixed cost

Answer 1

Month	No. of Customers	Service cost	Service Cost per Unit
March	500	$7,600	$15.20
April	520	$7,960	$15.31
May	480	$7,200	$15.00
Correct Option A i.e. Semi-variable (or mixed) cost
Reason: Per unit cost is not constant at each level of activity hence its not variable cost. Further total cost is not constant at each activity level so its also not a fixed cost. And its different at each level of activity in total hence its not step fixed cost.