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Choose the Correct Answer: Which of the following is usually classified as stepped cost? (a) telephone (b) raw materials (c) rates (d) supervisor's wages

   Choose the Correct Answer:
Which of the following is usually classified as stepped cost?
(a) telephone
(b) raw materials
(c) rates
(d) supervisor's wages

Cost Accounting

Cost Accounting

K. Alex 1st Edition

Chapter 8, Problem 7

Instant Answer

Step 1

Stepped costs are costs that remain fixed over a certain level of activity, but will increase to a higher fixed amount once a certain threshold is exceeded. This increase is not gradual but occurs in steps. Show more…

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Choose the Correct Answer: Which of the following is usually classified as stepped cost? (a) telephone (b) raw materials (c) rates (d) supervisor's wages

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Key Concepts

Stepped Cost

A stepped cost is one that remains constant over a certain range of activity or output, but then increases in a jump or 'step' when that activity exceeds a specific threshold. This cost behavior is seen in costs that are fixed within a certain band of usage but are subject to discrete increases as demand or production expands.

Cost Behavior

Cost behavior refers to the way costs change in response to variations in activity levels. It distinguishes between fixed costs, which remain constant regardless of activity within a certain range, variable costs, which change proportionally with activity, and stepped costs, which behave as fixed costs over intervals before increasing at set thresholds.

Cost Classification

Cost classification involves categorizing costs based on their behavior and relationship with production levels. Recognizing whether a cost is fixed, variable, or stepped is crucial for budgeting, forecasting, and making informed business decisions, as each type of cost responds differently to changes in operational activity.

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