Which One of the Following Is the Best Example of a Step

question 4

Short Answer

Which one of the following is the best example of a step cost for Ace Manufacturing? a. Paying a higher factory utility bill for the month of June.
B) Cutting back health care coverage for employees.
C) Terminating the manufacturing quality control employees.
D) Opening a new assembly line for one of the company's most popular products as a result of its original assembly line continually operating at capacity.

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Definitions:

Contribution Margin Ratio

The percentage of each dollar of sales that is available to apply to fixed costs and contribute to net income; calculated as unit contribution margin divided by unit selling price.

Unit Contribution Margin

The amount of revenue remaining per unit after deducting variable costs; calculated as unit selling price minus unit variable costs.

Unit Sales Price

The amount that a business charges for one unit of its product or service.

High-Low Method

A technique used in cost accounting to estimate variable and fixed costs based on the highest and lowest levels of activity.