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Riddell Company manufactures one type of basketball. Each basketball is sold for $55 and the individual contribution margin is $27. Total fixed costs are $185,000 annually. Included in fixed costs are two production supervisor’s salaries of $96,000. Management estimates that production supervisors can effectively oversee the production of 6,000 basketballs. After that, an additional production supervisor needs to be hired.

Production supervisor’s salaries are a:

a. Variable cost
b. Mixed cost
c. Opportunity cost
d. Step cost

User HAlE
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1 Answer

3 votes

Answer:

D. Step cost

Step-by-step explanation:

Riddell Company manufactures one type of basketball. Each basketball is sold for $55 and the individual contribution margin is $27. Total fixed costs are $185,000 annually. Included in fixed costs are two production supervisor’s salaries of $96,000. Management estimates that production supervisors can effectively oversee the production of 6,000 basketballs. After that, an additional production supervisor needs to be hired.

Production supervisor’s salaries are a step cost which are expenses that are constant for a given level of activity and does not change steadily with changes in activity volume, but rather at discrete points.

User Marco Sacchi
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