Forums › FIA Forums › MA1 Management Information Forums › example of situation for stepped fixed cost per unit
- This topic has 4 replies, 4 voices, and was last updated 9 years ago by Ken Garrett.
- AuthorPosts
- June 21, 2015 at 4:26 pm #258425
How can I understand about stepped fixed cost per unit?
June 21, 2015 at 5:23 pm #258427stepped cost rise suddenly. there is a jump. for example, if u have to hire an extra supervisor to handle increased production, this is a stepped cost. this suprvisor was not present before. but after hiring, his monthly salary will stepped.
for example if in january there was no extra supervisor then the extra cost is zero. after hiring the extra supervisor, lets say at 2000 per month, the ost will jump by 2000 in feb.
this is an example of stepped costs.
another example are electricity rates in pakistan. if u cross a limit of usage, the rates simply jump.
note that variable costs increase in a direct proportion to the amount of raw material being used. the more u use, simply multiply the qty by the rate. this is different from stepped costs.
hope this helps
October 20, 2015 at 5:05 pm #277883What is fixed cost?
October 20, 2015 at 5:27 pm #277889fixed costs r those that do not change over the next 12 months. for example rent or salary of managers. at the end of the contract of rent, the rent may go up but it will stay constant for the period of the contract.
fixed cost per unit drops as number of units produced increases.
October 20, 2015 at 10:35 pm #277942Fixed costs are costs that do not vary with output. For example, rent is fixed for a period and is not affected by production volume.
Material costs, in contrast, are variable. If you double production you will double the amount and cost of material used.
- AuthorPosts
- You must be logged in to reply to this topic.