ICAEW BIP · Chapter 1 · Question 4 of 10
Each production supervisor at Harlow Fabrications can oversee a maximum of 12 operatives and is paid £34,000 a year. Next year the company plans to employ 40 operatives. What is the budgeted annual cost of supervision?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) £136,000
Explanation
Supervision is a stepped fixed cost because supervisors must be employed in whole numbers. 40 / 12 = 3.33, so 4 supervisors are required (3 could only oversee 36 operatives). Cost = 4 x £34,000 = £136,000.
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