Which Of The Following Correctly Describes A Step Cost?

Which of the following is an underlying assumption of CVP analysis?

The assumptions underlying CVP analysis are: The behavior of both costs and revenues are linear throughout the relevant range of activity.

Costs can be classified accurately as either fixed or variable.

Changes in activity are the only factors that affect costs..

What is the difference between full absorption costing and variable costing?

Absorption costing, also known as full costing, entails allocating fixed overhead costs across all units produced for the period, resulting in a per-unit cost. Variable costing includes all of the variable direct costs in COGS but excludes direct, fixed overhead costs.

What is High Low method?

In cost accounting, the high-low method is a way of attempting to separate out fixed and variable costs given a limited amount of data. The high-low method involves taking the highest level of activity and the lowest level of activity and comparing the total costs at each level.

Is rent a fixed cost?

Fixed costs remain the same regardless of whether goods or services are produced or not. Thus, a company cannot avoid fixed costs. … The most common examples of fixed costs include lease and rent payments, utilities, insurance, certain salaries, and interest payments.

Which best describes fixed average?

Define Fixed Average? The average amount of sales or volume over a specific series or time period: for example, first month of the year or second week of the second month.

How are total costs calculated?

Add your fixed and variable costs to determine your total cost. As with personal budgets, the formula for calculating a business’s total costs is quite simple: Fixed Costs + Variable Costs = Total Cost.

Is the use of fixed costs to extract higher percentage changes in profits as sales activity changes?

Operating leverage is: the use of fixed costs to extract higher percentage changes in profits as sales activity changes.

What is a step cost?

Step costs are expenses that are constant for a given level of activity, but increase or decrease once a threshold is crossed. Step costs change disproportionately when production levels of a manufacturer, or activity levels of any enterprise, increase or decrease.

What is an example of a step cost?

Step Costs in the News Step costs are common – the cost of a new production facility, the cost of a new machine, supervision costs, marketing costs, etc., are all step costs.

What is step cost behavior?

Stepped cost refers to the behavior of the total cost of an activity at various levels of the activity. When a stepped cost is plotted on a graph (with the total cost represented by the y-axis and the quantity of the activity represented by the x-axis) the lines will appear as steps or stairs rising from left to right.

What is step variable cost and where would you see it?

A step variable cost is a cost that generally varies with the level of activity, but which tends to be incurred at certain discrete points and involve large changes in amounts when such a point is reached. Conversely, a truly variable cost will vary continually and directly in concert with the level of activity.

What are mixed costs?

Mixed costs are costs that contain a portion of both fixed and variable costs. Common examples include utilities and even your cell phone!

What is regression analysis quizlet?

Regression analysis is a predictive analysis technique in which one or more variables are used to predict the level of another by use of the straight-line formula, y=a+bx. -BIVARIATE REGRESSION ANALYSIS is a type of regression in which only two variables are used in the regression, predictive model.

How do you calculate step fixed cost?

High-low methodStep 1: Find the variable cost per unit (VC/unit) Total cost at high activity level – Total cost at low activity level. … Step 2: Find the fixed cost (FC) TC at high activity level – (Units at high activity level × VC/unit)Step 3: Find the Total cost (TC) TC = FC + VC/unit x Activity level.

What are examples of mixed costs?

Utilities including electricity, water and natural gas are usually mixed costs. You are charged a fixed rate for using a base amount and then pay an additional variable charge for any usage over the base amount. For example, your water company charges you a fixed $75 charge for using up to 500 gallons of water.

What is step fixed cost?

A step fixed cost is a cost that does not change within certain high and low thresholds of activity, but which will change when these thresholds are breached. … For example, if sales volume declines, management could sell off a production line, thereby terminating all associated costs.

Which of the following describes step variable costs?

Which of the following describes step-variable costs? … They are the costs that have both a fixed and a step-cost component.

Which of the following statements best explains the difference between fixed cost and variable cost?

Which of the following explains the difference between fixed and variable​ costs? … Variable costs change with the number of units of a product produced and​ sold, whereas fixed costs must be paid regardless of the number of units produced and sold.