Cost classification: semi-variable with fixed lease and per-inspection variable charge

Steps:

• Fixed cost component: $8,000 annual lease fee, incurred regardless of inspections.
• Variable cost component: $2 per inspection, tied to production since one inspection every 10 products.
• Total cost structure: fixed + variable with output, defining it as semi-variable (not stepped, which jumps in bands).
• Annual cost calculation: $8,000 + ($2 × 12,000 inspections) = $32,000, based on implied 120,000 products/year.

Why B is correct:

• Semi-variable costs combine fixed ($8,000) and variable ($2/inspection) elements per accounting definition; $32,000 matches total with given production volume.

Why the others are wrong:

• A: Incorrect total cost ($2,400 too low, ignores fixed and undercounts variables).
• C: Stepped costs change abruptly in steps, not linearly variable here; $24,000 omits fixed portion.
• D: Stepped misclassifies the linear variable element; $32,000 cost correct but type wrong.

Final answer: B