Step-Variable Costs

The term step-variable costs is a synonym for semi-variable or semi-fixed costs and contemplates an increase in costs with an increase in capacity. Step-variable costs behave like fixed costs over a portion of the relevant range and then increase incrementally in a stairstep manner as capacity increases. For example, insurance expense may be fixed over a particular range of production within the overall relevant range but may increase incrementally as the number of locations or number of hours worked increases.