Question

Which of the following describes step-variable costs?

a.They are the costs that have both a fixed and a step-cost component.
b.They are costs that keep changing at all levels of step-cost activity.
c.They are costs that follow a step-cost behavior with narrow steps.
d.They are costs that follow a step-cost behavior with wide steps.

Answer 1

Step-variable costs are costs that follow a step-cost behavior with narrow steps and increase or decrease in fixed increments within a certain range of activity.

Step-by-step explanation:

Step-variable costs are costs that follow a step-cost behavior with narrow steps. These costs increase or decrease in fixed increments within a certain range of activity.

For example, if a manufacturing plant requires one additional worker for every 100 units produced, the cost of labor would be a step-variable cost, as the cost would remain constant until the production exceeds the threshold for adding another worker.