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Identify a cost: Variable, Fixed, Mixed, and Step Costs

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Describe a variable, fixed, mixed and step cost in an organization. Would this organization be more likely to benefit from using a manufacturing cost hierarchy or a customer cost hierarchy for determining cost drivers? Why? Identify a cost in each of the four cost hierarchies.

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Solution Summary

Your discussion is 257 words and describes a commercial laundry firm, explaining why customer cost would be a better hierarchy for them.

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National Linen launders commercial tablecloths, bedding, garments and rags for restaurants, medical facilities, hotels and auto repair shops. Costs that fit each of the categories include:

Variable: laundry soap, water, folding labor
Fixed: plant rent, IT cost
Mixed: utilities at the plant, fleet maintenance
Step: supervision labor; number of delivery trips

The firm is more likely to benefit from ...

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Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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