Which of the following best describes 'semi-variable costs'?

Semi-variable costs are defined as costs that include both fixed and variable components. This means that part of the cost remains constant regardless of the level of production, while another part varies depending on the volume of production. For example, a utility bill may have a fixed monthly charge (fixed component) plus an additional charge based on usage that increases as production rises (variable component).

Understanding semi-variable costs is crucial for accurately budgeting and forecasting because it allows businesses to anticipate expenses that will fluctuate with production levels while recognizing the portion of costs that will remain stable. This classification helps in making strategic decisions, as a company can plan for fixed costs while managing the variable portion according to expected changes in production or sales.