STEP COST Meaning and
Definition
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Step cost is a term used in managerial accounting and finance to describe a type of cost that varies with the activity level, but not in a continuous or proportional manner. Also known as a semi-variable cost or semi-fixed cost, step cost represents an expense that remains constant within a certain range of activity but increases once the activity level reaches a specific point or threshold, known as the step.
When the activity level is below the step point or within the range, the cost remains the same regardless of variations in the activity. However, once the activity level surpasses the step point, the cost suddenly increases to a new level. This jump in cost is typically triggered by the need for additional resources, such as additional labor or equipment, to accommodate the higher level of activity.
Step costs are characterized by a staircase-like pattern on a cost-volume graph, where the cost remains constant at one level until the activity surpasses the step point, at which point it immediately jumps to a higher level. This distinctive nature of step costs distinguishes them from variable costs, which change proportionally with the activity level, and fixed costs, which remain constant regardless of activity level.
Understanding the concept of step cost can be valuable in cost analysis, budgeting, and decision-making processes as it allows businesses to accurately assess the impact of changes in activity levels on overall costs and financial performance.
Common Misspellings for STEP COST
- atep cost
- ztep cost
- xtep cost
- dtep cost
- etep cost
- wtep cost
- srep cost
- sfep cost
- sgep cost
- syep cost
- s6ep cost
- s5ep cost
- stwp cost
- stsp cost
- stdp cost
- strp cost
- st4p cost
- st3p cost
- steo cost
- stel cost
Etymology of STEP COST
The term "step cost" does not have a specific etymology as it is a combination of two words: "step" and "cost".
Step: The word "step" originated from the Old English word "steppan" which means "to step or walk". It is related to similar words in other Germanic languages. Over time, "step" has evolved to refer to the movement of lifting one foot and then the other while walking or progressing forward.
Cost: The word "cost" comes from the Old French word "coste" which means "expense, outlay, or cost". It was derived from the Latin word "constare" meaning "to stand at, to cost". The Latin word "constare" is a combination of "con-" (together) and "stare" (to stand), implying that the cost is what "stands together" or "stands as a result of".
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