Step cost and mixed cost.docx - Step cost can be defined as...

This preview shows page 1 out of 1 page.

Step cost can be defined as a constant and fixed expense up to a level of activity, due to the changes in resources and production level. It is important as it is a cost that do not change as it is constant at specific level of activity but it is decrees or increase when the volume of the activity changed. For example, if a restaurant can serve 10 customers an hour with one employee, they need to pay only the salary for one employee and the other cost meanwhile if the shop starts to receiving more than 10 customers per hour, the restaurant must increase the manpower and hire another employee which will increase the cost. Other example: if one machine can produce one hundred units with a cost of $10,000. If the company need to produce 100 more units than the need of one extra machine is required and the cost of the two machines is (2*10,000) $20,000 if we assume there is no other cost. Mixed cost contain both fixed charges by having a fixed portion of the cost incurred and the

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture