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) Between certain levels of activity,the step-variable costs have the same behaviour as fixed costs.
C) The step-variable costs remain constant through the same relevant range of activity as related fixed costs.
D) The step-variable costs are excluded from consideration in budgeting.

Question

Quizplus · Accepted Answer

Step-variable costs have a fixed cost component up to a certain level of activity, beyond which they increase in step-like manner. This means that between certain levels of activity, the step-variable costs have the same behavior as fixed costs. However, they do not vary in direct proportion to changes in the level of activity, as stated in option A. Option C is incorrect because the step-variable costs do not remain constant through the same relevant range of activity as related fixed costs. Option D is also incorrect because step-variable costs should be considered in budgeting as they can have a significant impact on the overall budget.

Which of the Following Statements Is Most Correct About Step-Variable