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
A)variable cost.
B)fixed cost.
C)step cost.
D)mixed cost.

Question

Quizplus · Accepted Answer

The cost of maintenance would be classified as a step cost since it only occurs after a certain number of units are produced. It is not a fixed cost because the total amount of maintenance cost would vary depending on the level of production. It is also not a variable cost because the cost per unit produced does not change with production level. Lastly, it is not a mixed cost because it cannot be separated into fixed and variable components.