Each of Davisson\'s production managers (annual salary cost, $45,000) can overse
ID: 2391896 • Letter: E
Question
Each of Davisson's production managers (annual salary cost, $45,000) can oversee 60,000 machine hours of manufacturing activity. Thus, if the company has 50,000 hours of manufacturing activity, one manager is needed; for 75,000 hours, two managers are needed; for 125,000 hours, three managers are needed; and so forth. Davisson's salary cost can best be described as a:
variable cost.
semivariable cost.
step-variable cost.
fixed cost.
step-fixed cost.
variable cost.
semivariable cost.
step-variable cost.
fixed cost.
step-fixed cost.
Explanation / Answer
Answer
No. of machine hours
No. of managers
Annual Salary per manager
Total Salaries
0 - 60000
1
$45,000
$45,000
60001 - 120000
2
$45,000
$90,000
120001 - 180000
3
$45,000
$135,000
This is a feature of Step Fixed Cost.
No. of machine hours
No. of managers
Annual Salary per manager
Total Salaries
0 - 60000
1
$45,000
$45,000
60001 - 120000
2
$45,000
$90,000
120001 - 180000
3
$45,000
$135,000
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