Laura wrote with an interesting question Hello, I am an accounting professor ... Last week, we discussed Step costs. I gave an example of step costs (janitors, supervisors) which typically have a large step. A student asked what type of cost would be represented by a small step? Can you provide a good example of a small step cost? I'd appreciate any help you could provide. Laura I replied, semi shamefully, as follows: Hi Laura, An interesting question that I’d never thought about before. Step costs can be looked at from two points of view: step costs such as supervision and management costs step fixed costs relating to costs associated with fixed assets As to size, we could imagine a number of situations that might cover this problem, even if they are all similar situations. A machine could, for example, be highly specialised but only be able to produce 50 units a week. It may be relatively inexpensive to buy and run but if demand grew suddenly from, say, 40 units a week to 75 units a week, a new machine would be needed … this situation contrasts the situation in which a supervisor supervises, say, 30 people … I’m not sure I’ve been as helpful as you would like but in your position I might be tempted to ask the student who asked the question to provide an example in answer to his own question! Alternatively, I have in the past added such a question to the end of an assignment or term paper for a few additional marks. At least someone somewhere will provide a decent solution even if our own brain cells are inadequate! Well, mine anyway! Best wishes and let me know what else you can come up with. DW