example of situation for stepped fixed cost per unit

stepped 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

fixed 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.