Which type of cost increases in steps with changes in production volumes?

Step costs are characterized by their behavior in relation to production volumes. They remain fixed over certain ranges of activity but jump to a higher level once those activity levels exceed predetermined thresholds. This means that when production increases and surpasses specific volume limits, a step cost increases in increments rather than continuously.

For instance, a manufacturing company may require an additional supervisor for every 100 units produced, leading to an increase in labor costs only when production reaches each set threshold. This step increase is distinct from variable costs, which change proportionally with production volume, and fixed costs, which do not change with production levels within a relevant range. Curvilinear costs also behave differently, as they change in a nonlinear fashion rather than in distinct steps. Understanding these cost behaviors is crucial for planning and budgeting in business operations.