Step Costs - Managerial Accounting

The video tutorial explains step costs, which are costs that remain fixed within a certain range of activity but increase to a higher level once the upper limit of that range is exceeded. An example is given using a preschool class, where a teacher can handle up to 15 students, but a 16th student requires hiring an additional teacher, thus increasing costs. The concept is visually represented as steps on a graph, where each step represents a range of activity with a fixed cost, and the cost increases as the activity surpasses each threshold.

What happens to step costs when the upper limit of a range is exceeded?

• They increase to a higher cost level.

• They fluctuate randomly.

• They remain constant.

• They decrease.

In the preschool class example, what triggers the need for an additional teacher?

• The arrival of the 30th student.

• The arrival of the 16th student.

• The arrival of the 10th student.

• The arrival of the 20th student.

How does the salary of teachers change as more students enroll in the preschool class?

• It decreases with each new student.

• It remains constant regardless of the number of students.

• It increases when a new teacher is required.

• It fluctuates based on student performance.

What does the graph of step costs resemble?

• A straight line.

• A series of steps.

• A downward slope.

• A zigzag pattern.

When does the graph of step costs move up to the next level?

• When the activity level exceeds its threshold.

• When the activity level is below its threshold.

• When the activity level remains constant.

• When the activity level decreases.