Each of Acorn Manufacturing's production managers can oversee 80,000 machine hours of manufacturing activity. The annual salary of a production manager is $55,000. If Acorn has 60,000 hours of manufacturing activity, one manager is needed; for 100,000 hours, two managers are needed; for 150,000 hours, three managers are needed; and so forth. Acorn's salary cost can best be described as a:
A)variable cost.
B)curvilinear cost.
C)step-variable cost.
D)fixed cost.
E)step-fixed cost.

Question

Quizplus · Accepted Answer

The salary cost is a step-fixed cost because it remains constant over a range of activity (up to 80,000 hours) and then increases in steps as activity exceeds each threshold.

Each of Acorn Manufacturing's Production Managers Can Oversee 80,000 Machine