Finance and accounting
Step cost
A cost that is flat over a range, then jumps.
Facts checked against sources onWhat does Step cost mean?
A step cost stays flat until volume passes a limit, then jumps to a new level. One supervisor can manage up to 20 workers; the 21st worker means hiring a second supervisor. Step costs matter in capacity and expansion cases.
Where does it come up in case interview prep?
- Workforce planning: headcount maths, attrition and hiring lead timesLesson in People, rules and responsibility: organisation, regulation and sustainability
Related terms
- Fixed costA cost that stays the same when volume changes, within a normal range.
- Semi-variable costA cost with a fixed part and a part that moves with volume.
- Capacity utilizationActual output as a share of the most that could be produced.
- ProfitThe money left over after costs. Revenue minus cost.
- RevenueMoney earned from sales, before costs.
- CostWhat it takes to make and sell the product in a period.
- Variable costA cost that rises and falls with how much you make.
- Marginal costThe extra cost of making one more unit.
Learn it in context
See Step cost at work in a lesson from People, rules and responsibility: organisation, regulation and sustainability, with checks as you go.
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