Which is NOT a step cost?
A)When oil and gas exploration activity reaches a certain level in a given area,a company leases an additional rig.The lease cost of the rigs is a step cost.
B)When ten nurses are added to a shift,a nursing supervisor is also added to the shift.The salaries of the nursing supervisors are a step cost.
C)When a telemarketing company adds ten workers to a shift,a supervisor is also added to the shift.The salaries of the supervisors are a step cost.
D)When a manufacturing company ceases production,a skeleton crew of maintenance workers continues to work,but the rest are terminated.When production resumes,maintenance workers are rehired in direct proportion to the amount of production.The wages of the maintenance workers are a step cost.

Question

Quizplus · Accepted Answer

A step cost is a fixed cost that increases or decreases only when production, sales, or some other activity reaches a certain threshold. In option D, the cost of wages for maintenance workers don't increase or decrease only when production, sales, or some other activity reaches a certain threshold, but it is in direct proportion to the amount of production. Therefore, it is not a step cost. Options A, B and C are all examples of step cost.

Which Is NOT a Step Cost