A stepped cost is most accurately described as:

A stepped cost is most accurately described as:

• A. A cost that is fixed in nature and does not change with activity.
• B. A cost that varies directly with output.
• C. A cost that remains fixed within certain activity levels but increases in steps beyond them.
• D. A cost that is fixed within certain activity levels but increases in discrete steps as activity rises.

Answer: (D)

Stepped costs have a staircase pattern: within a certain range of activity the total cost stays fixed, and when activity crosses a threshold, the cost jumps to a new fixed level. This means costs do not change gradually with activity, but instead rise in discrete steps as activity increases. That’s exactly what the described option captures—costs are fixed within specific activity levels and then increase in discrete steps as activity rises. The other ideas describe purely fixed costs or purely variable costs, which don’t reflect the jump to a higher fixed amount at higher activity levels.

Stepped costs have a staircase pattern: within a certain range of activity the total cost stays fixed, and when activity crosses a threshold, the cost jumps to a new fixed level. This means costs do not change gradually with activity, but instead rise in discrete steps as activity increases.

That’s exactly what the described option captures—costs are fixed within specific activity levels and then increase in discrete steps as activity rises. The other ideas describe purely fixed costs or purely variable costs, which don’t reflect the jump to a higher fixed amount at higher activity levels.