Question

Costs that remain the same over a wide range of activity, but jump to a different amount outside that range, are termed:

A. step-fixed costs.
B. step-variable costs.
C. semivariable costs.
D. curvilinear costs.
E. mixed costs.

Answer 1

Costs that remain unchanged over a range of activity but increase at certain points are known as step-fixed costs. They are constant up to a production threshold, after which additional resources may increase these costs.

Step-by-step explanation:

The costs that remain the same over a wide range of activity but jump to a different amount outside that range are termed step-fixed costs. These costs stay constant as production increases but will increase in a step-like fashion once certain levels of activity are exceeded. An example of step-fixed costs might be the salaries of production supervisors in a factory, which remain constant unless production volume increases significantly, at which point an additional supervisor might be required, thus increasing the step-fixed cost.

In contrast, step-variable costs might change as the level of productive activity changes, but not immediately, while semivariable costs and mixed costs are a combination of fixed and variable components. Curvilinear costs vary with activity level but not in a linear fashion, often reflecting diminishing marginal returns and increasing marginal costs with higher levels of production.