Mailroom clerks at Speedy Mail are paid a salary of $2200 per month. All clerks are full time. A new clerk is hired whenever the volume of mail increases by 40 000 pieces since the last clerk was hired. If volume of mail is the activity base mail-handling costs are:

Question

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Since a new clerk is only hired when the volume of mail increases by a certain amount, the mail-handling costs are step-variable costs. The salary of the mailroom clerks would be considered a fixed cost, but the addition of a new clerk represents a variable cost that increases as the volume of mail increases.

Mailroom Clerks at Speedy Mail Are Paid a Salary of $2200