Asked by Mohamad Nassar on Apr 30, 2024
Verified
Which of the following statements is most correct about step-variable costs
A) The step-variable costs vary in direct proportion to changes in the level of activity.
B) The step-variable costs remain constant through the same relevant range of activity as related fixed costs.
C) The step-variable costs are excluded from consideration in budgeting.
D) Between certain levels of activity, the step-variable costs have the same behaviour as fixed costs.
Step-variable Costs
Costs that remain fixed for a set level of production or activity, but can change in steps when a certain threshold is exceeded.
- Diagnose the essence of various costs, including fixed, variable, mixed, and step-variable, and their performance within the relevant range.
Verified Answer
EP
Elizabeth PedersenMay 02, 2024
Final Answer :
D
Explanation :
Step-variable costs have a fixed cost for a certain level of volume and then jump to another fixed cost for the next level. Between these levels, the step-variable costs have the same behavior as fixed costs. Therefore, option D is the correct answer. Options A and B are incorrect as these descriptions apply to variable and fixed costs, respectively. Option C is also incorrect as step-variable costs are an important consideration in budgeting decisions.
Learning Objectives
- Diagnose the essence of various costs, including fixed, variable, mixed, and step-variable, and their performance within the relevant range.