Stepped costs increase discretely at production thresholds

Steps:

• Identify the cost: number of supervisors required for production.
• Note the change: 1 supervisor for 5000 units, 2 for 10,000 units.
• Observe the pattern: cost stays fixed within a range but jumps abruptly when output doubles.
• Classify: this discrete jump indicates a stepped cost behavior.

Why C is correct:

• Stepped costs remain constant over specific activity ranges but increase in fixed increments at defined thresholds, matching the supervisor addition at 5000-unit intervals.

Why the others are wrong:

• A. Fixed costs do not change with production volume at all.
• B. Semi-variable costs have a fixed base plus a proportional variable portion, not discrete jumps.
• D. Variable costs change continuously and directly with each unit produced.

Final answer: C