Which one of the following is the best example of a step cost for Ace Manufacturing?
A)Paying a higher factory utility bill for the month of June.
B)Cutting back health care coverage for employees.
C)Terminating the manufacturing quality control employees.
D)Opening a new assembly line for one of the company's most popular products as a result of its original assembly line continually operating at capacity.

Question

Quizplus · Accepted Answer

Opening a new assembly line is a clear example of a step cost as it involves a significant, one-time expense to expand the company's production capacity. The other options may result in cost savings, but they do not involve a sudden and significant increase in costs like opening a new assembly line would.

Which One of the Following Is the Best Example of a Step