Question

stella, inc. must perform maintenance on its production machinery after every 10,000 units produced. production varies between 12,000 and 30,000 units a year. the cost of this maintenance would be classified as a

Answer 1

This type of the cost maintenance is an example of - A step cost.

What is step cost ?

Step costs are costs that remain constant for an activity level but change whenever a threshold is crossed. Step costs are disproportionately affected by changes in a manufacturer's production levels or any enterprise's activity levels. Understanding step costs is crucial at times of demand spikes or traffic jams. To reduce costs, businesses might modify their manufacturing to run just below a step cost barrier. Salaries, benefits, fashion, and other expenses are more instances of step costs for businesses.

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