An example of a step-fixed cost would be:
A)the cost of factory insurance because the insurance company increased the premium.
B)the cost of supervision since a second supervisor was added to oversee the new second shift.
C)depreciation of equipment because it is computed on the units of production method.
D)utility costs because it costs more to heat the building in the winter.

Question

Quizplus · Accepted Answer

Step-fixed costs are fixed costs that increase in steps, rather than in a continuous manner, as activity level increases. Adding a second supervisor is an example of a step-fixed cost because the cost of supervision will increase in a step-like manner. The cost will remain at the same level until a certain level of activity is reached, at which point the cost will increase to the next step. The other options relate to variable costs or fixed costs that may increase gradually, rather than in steps.

An Example of a Step-Fixed Cost Would Be