CIMA BA2 · Chapter 2 · Question 2 of 8
A business rents one warehouse for $30,000 a year, which can hold up to 5,000 pallets. If more space is needed, a second identical warehouse must be rented. How would the warehouse rent be classified?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A stepped fixed cost
Explanation
The rent is fixed within a range of activity (up to 5,000 pallets) but jumps by $30,000 when activity exceeds that range. This is a stepped fixed cost. A semi-variable cost has a fixed element plus a variable element that rises continuously with activity.
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