A salesman of a company dealing in pet foods is paid a fixed salary of Rs 20000 per month and furthe...........

A salesman of a company dealing in pet foods is paid a fixed salary of Rs.20000 per month and furthermore, Rs.20 extra per unit of the product sold beyond the target sales. Identify the type of cost being described in the given example.

Fixed cost

Variable cost

Semi-variable cost

None of the above

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Explanation:

- Fixed cost: This is a cost that does not change with the level of goods or services produced. The fixed salary of Rs. 20,000 per month is an example of a fixed cost.

- Variable cost: This cost varies with the production output. In this example, the Rs. 20 extra per unit sold beyond the target sales represents a variable cost.

- Semi-variable cost: This cost includes both fixed and variable components. Here, the fixed salary is combined with the variable commission, making it a semi-variable cost.

- None of the above: This option would only be applicable if none of the descriptions fit the example, which is not the case here.

The correct answer is: Option 3 - Semi-variable cost.