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What's the difference between step-variable cost and step-fixed cost? Please give example for each of them.

What's the difference between step-variable cost and step-fixed cost? Please give example for each of them.

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Answer #1

A stepped cost is also referred to as a step cost, a step-variable cost, or a step-fixed cost. The difference between a step-variable cost and a step-fixed cost has to do with the width of the range of activity. If the total cost increases with small increases in activity, it may be referred to as a step-variable cost. If the total cost will change only with large increases in the quantity of activity, the term step-fixed cost is more likely to be used.

For example, a manufacturer will want to know how its costs will increase if a new product line is added (or how costs could decrease if an existing product line is eliminated).

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