Each of Boggart's production managers (annual salary cost, $45,000) can oversee 60,000 machine hours of manufacturing activity. Thus, if the company has 50,000 hours of manufacturing activity, one manager is needed; for 75,000 hours, two managers are needed; for 125,000 hours, three managers are needed; and so forth. Boggart's salary cost can best be described as a:
A) variable cost.
B) semivariable cost.
C) step-variable cost.
D) fixed cost.
E) step-fixed cost.

Question

Quizplus · Accepted Answer

The salary cost for Boggart's production managers is a step-fixed cost because it remains constant for a range of activity (up to a certain number of machine hours) and then jumps to a higher level as the activity exceeds that range.

Each of Boggart's Production Managers (Annual Salary Cost, $45,000) Can