What is Semi-Variable Costs?
Semi-variable costs (also called mixed costs) are expenses that contain both a fixed component, incurred regardless of activity, and a variable component that changes proportionally with activity levels.
How It Works
- Total cost = fixed component + (variable rate × activity).
- Common examples: utility bills, vehicle costs, sales-rep base salary + commission.
- Separated into fixed and variable using high-low method or regression analysis.
- Used in CVP analysis, break-even, and budgeting.
Saudi Context
Saudi businesses commonly face semi-variable costs in utilities (Saudi Electricity Company tariffs have a fixed connection charge + per-kWh variable charge) and telecom (stc/Mobily monthly plan + per-unit overage). Identifying the fixed/variable split helps Saudi SMEs forecast costs as activity scales.
Example
A Saudi delivery business pays SAR 2,500/month fixed phone plan + SAR 0.10 per call. At 5,000 calls/month: total = 2,500 + 500 = SAR 3,000.