The type of cost relationship that exists when costs remain the same at certain levels of output, and then jump to higher levels when the level of a cost driver increases past certain points, is
A) Fixed responsiveness
B) Proportional responsiveness
C) Semi-variable cost relationship
D) Step cost relationship

Question

Quizplus · Accepted Answer

This is a classic description of a step cost relationship, where costs remain fixed within a certain range of output or activity, but then suddenly jump up to a higher level once a certain threshold is reached. This type of cost relationship is often seen in industries where there are significant economies of scale, such as manufacturing or logistics, where fixed costs must be incurred to achieve a certain level of output, but then incremental costs are minimal once that output level has been reached.

The Type of Cost Relationship That Exists When Costs Remain