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Which ONE of the following costs is likely to be a​ semi-variable cost?

A. Depreciation of buildings
B. Raw material costs
C. Buildings insurance
D. Heat and light

1 Answer

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Final answer:

Heat and light is the cost likely to be a semi-variable cost, containing both fixed and variable components, making it partially dependent on the level of production.

Step-by-step explanation:

In the context of business expenses, costs can be classified as fixed costs, variable costs, or semi-variable costs. Fixed costs are expenditures that do not change regardless of the level of production, such as the rent on a factory or a retail space. Variable costs fluctuate with the level of output, like the costs for raw materials and labor which are directly tied to production levels. Semi-variable costs contain both fixed and variable components, making them partially dependent on the level of production.

Given the options provided, heat and light is likely to be a semi-variable cost. This is because while there is a minimum level of heat and light needed to keep a facility operational regardless of production levels (fixed component), the more production activity there is, the higher the consumption of heat and light due to longer operating hours or a larger workforce (variable component).

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