Supervisors' pay as a stepped fixed cost

Steps:

• Calculate operators needed: 7700 units / 100 units per operator = 77 operators.
• Determine supervisors required: 77 operators / 10 per supervisor = 7.7, rounded up to 8 supervisors (cannot hire partial).
• Compute total pay: 8 supervisors × $550 =$4400.
• Classify cost: Fixed within activity ranges (e.g., 71–80 operators need 8), but steps up discretely—thus stepped fixed.

Why C is correct:

• Stepped costs are fixed amounts that change in discrete increments with activity levels, matching supervisors hired in whole units for batches of 10 operators.

Why the others are wrong:

• A: Wrong amount; 4325 implies partial supervisors (7.863 × 550), but hiring is discrete.
• B: Incorrect type; pay does not vary proportionally with output (not $6.33 per unit or per operator).
• D: Wrong type and close amount; 4400 is right total, but variable implies smooth proportionality, not steps.

Final answer: C