Step Cost Examples

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2018-03-16  · Step costs. For example, a facility cost will remain steady until additional floor space is constructed, at which point the cost will increase to a new and higher level as the entity incurs new costs to maintain the additional floor space, to heat and air condition it, …

However, a step cost can also result from a significant new investment in variable costs such as parts and labor. For example, a factory may need to add a new shift to increase capacity with a minimum of 20 employees per shift. The costs associated with hiring the 20 new employees represent a step cost to increase production past a certain point.

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Step Cost Example. For example, a company that produces computer monitors might have the machinery, production staff and work space to make 5,000 monitors per year. If the company receives a contract to produce 10,000 monitors per year for five years for a major retail company, the company will incur step costs to meet the production load.

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2018-04-26  · Step fixed cost. Examples of step fixed costs include: The cost of starting up a new production shift, which includes utilities and the salaries of shift supervisors. The cost of a new production facility, which includes depreciation on the equipment and the salaries of …

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Examples of Step Costs. If the shop receives anywhere from zero to 30 customers per hour, it will only need to pay the cost of having one employee, say $50 ($20 for the employee, $30 for all other expenses, fixed and operating). If the shop begins receiving 31 or more customers per …

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