Labor Cost Classification by Demand Response

Steps:

• Demand increases lead to more machinists hired proportionally, making their costs variable as they change directly with output.
• Supervisors are hired in increments of one per eight machinists, creating discrete jumps in cost rather than smooth changes.
• Variable costs fluctuate continuously with activity level; stepped costs rise in fixed amounts at specific thresholds.
• Option D matches: machinists as variable, supervisors as stepped, describing total labor costs accurately.

Why D is correct:

• Variable costs vary directly with production volume (machinists); stepped costs remain fixed within ranges but jump at thresholds (supervisors per the 1:8 ratio).

Why the others are wrong:

• A: Machinists increase with demand, so not fixed; supervisors stepped, not purely variable.
• B: Supervisors added in steps, so not fixed; machinists clearly variable.
• C: Machinists vary continuously, not stepped; supervisors stepped, not variable.

Final answer: D