Question 1

SECTION A

NovaTech, a cloud software startup, pays a monthly server hosting fee of $5,000 which covers up to 10,000 active users. For every additional 1,000 users, an extra capacity block must be purchased for $800.

How should this cost be classified according to its behavior?

Accepted Answer

Analyze the cost behavior: it is flat up to a threshold, then jumps by a set amount for a new range. This is the definition of a step-fixed cost.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Confusing step-fixed with semi-variable. Semi-variable has a fixed base and a continuous variable rate per single unit.

SECTION A

NovaTech, a cloud software startup, pays a monthly server hosting fee of $5,000 which covers up to 10,000 active users. For every additional 1,000 users, an extra capacity block must be purchased for $800.

How should this cost be classified according to its behavior?

How to approach this question

Full Answer

Common mistakes

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