Costing - Fixed/variable and semi

System

Hello.

Can anyone agree or disagree with my answers please.
I have put my answers.
A man runs a small computer maintenance company with a small fleet of vehicles. Need to state whether expenses are fixed, variable or Semi variable.

Annual expenditure:

Petrol £6000 - Variable
Oil £200 - Variable
Service £1000 - Fixed
Repairs - £1000 - Variable
Insurance - £1200 - Fixed
Road Licence (Tax) - £600 - Fixed
Vehicle Depreciation - £2000 - Fixed

Cannot seem to see any semi ones.
Any help appreciated.

Thanks
Yas

System

Re:Costing - Fixed/variable and semi

Yazi

I think your ideas are fine.

For the benefit of others reading this there are a couple of general points.

Variable costs are costs that change as a direct consequence of more or fewer units being produced (or sold)

Fixed costs may change, but any changes are not a direct consequence of more or fewer units being produced (or sold)

And Semi-variable costs are costs with part caused by changes in the number of units produced (or sold) and part not.

Going through Yazi's example

A man runs a small computer maintenance company with a small fleet of vehicles

We are looking at computer maintenance, so we want to find any costs that will be directly affected by the man maintaining more computers:
Petrol: More computers needing repair will require more miles of driving and therefor more cost. This certainly looks to be variable. Although it varies with miles travelled rather than computers repaired. Afterall, not all the repair jobs are the same distance away.

Oil: A tricky one.
I have an oil change in my car once a year irrespective of how many miles I travel. So if I was a computer repair man, this would be a fixed cost (with an impicit assumption that somewhere along the way I would not change the oil in a car that was never used).
But this isn't about me, and I believe that every so many thousand miles a vehicle should have its oil changed and in those circumstances the oil cost is just as variable as the petrol. Pedants may want to know how many miles worth of oil is in the vehicles at the start and end of the year. (But they would !!)

Servicing is generally irrespective of miles travelled, and certinly bares no close relationship with number of computers repaired. I would go with fixed, but if you feel that high mileage vehicles might need more servicing you could have your semi-variable example here.

Repairs Again, one I am not 100% sure about. Your answer makes sense: more computer repairs lead to more miles and more miles mean the chance of a breakdown requiring repairs is all the more.
But what about the vehicle which gets a puncture ? I suspect this paricular repair may be nothing to with the number of computers needing to be repaired.

Road Tax is outside our control and a good example of a cost that can change but is most definitely a fixed cost.

Depreciation is more to do with company policy than anything else. Again fixed.

I hope that helps

sandy.hood@chichester.ac.uk

System

Re:Costing - Fixed/variable and semi

Hi Sandy

Thanks for your quick reply.
Always find your comments on this site very helpful.

Thank you
Yas