The relevant range refers to
a specific activity level that is bounded by a minimum and maximum amount
. Within the designated boundaries, certain revenue or expense levels can be expected to occur. Outside of that relevant range, revenues and expenses will likely differ from the expected amount.
What is relevant range example?
The relevant range is the range of activity
(e.g., production or sales) over which these relationships are valid
. For example, if the factory is operating at capacity, increasing production requires additional investment in fixed costs to expand the facility or to lease or build another factory.
Which one of the following is correct regarding a relevant range?
The relevant range refers to
a specific activity level that is bounded by a minimum and maximum amount
. Within the designated boundaries, certain revenue or expense levels can be expected to occur. Outside of that relevant range, revenues and expenses will likely differ from the expected amount.
Which of the following best describes the concept of relevant range?
The correct answer to this question is c) The relevant range is
the range of output over which cost assumptions are valid
.
What does the term relevant range mean quizlet?
STUDY. The term “relevant range” as used in cost accounting means
the range over which
.
A. relevant costs are incurred
.
How do you use relevant range?
With variable costs then, the relevant range will be the range where the
cost of adding one more
, will be the same as the last. In this example, from 0-100 widgets, each additional widget will add $1 in cost to our direct materials. Once we go above 100, we are outside of the relevant range.
Why is the relevant range important?
Why is relevant range important? Relevant range is important
because if you make the assumption that all of your costs will remain constant
, whether they are fixed or variable, you may make errors on your projections.
What is relevant change?
Relevant Change means
a change about something that the Competent Authority may or must consider in deciding whether to make the determination
or give the approval.
What role does the relevant range concept play?
What is the relevant range? What role does the relevant-range concept play in explaining how costs behave? Relevant range:
the band or range of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question
.
Why is relevant cost important in decision making?
The concept of relevant cost is
used to eliminate unnecessary data that could complicate the decision
-making process. As an example, relevant cost is used to determine whether to sell or keep a business unit.
What is a cost driver quizlet?
Cost driver:
a factor that causes or relates to a change in the cost of an activity
. Cost drivers cause or relate to cost changes, measured or quantified amounts of cost drivers are excellent bases of assigning resource costs to activities and for assigning the cost of activities to cost objects.
What is the high-low method?
The high-low method is an
accounting technique used to separate out fixed and variable costs in a limited set of data
. It involves taking the highest level of activity and the lowest level of activity and comparing the total costs at each level.
Which of the following is an example of a cost that is variable with respect?
An example of cost that is variable with respect to the number of units produced and sold:
Power to run production equipment
.
What type of cost is never relevant?
Sunk costs
are those costs that happened and there is not one thing we can do about it. These costs are never relevant in our decision making process because they already happened!
What is a relevant range of activity quizlet?
The relevant range is
the range of activity over which a company expects to operate during the year
. Is relevant range concept only important for variable costs? Disagree. The behavior of both fixed and variable costs are linear only over a certain range of activity.
What is the importance of analyzing cost behavior?
Understanding cost behavior is essential for cost-volume-profit analysis as well. The cost-volume-profit (CVP) analysis
studies the impact of change in costs and volume on the profit
. It helps the management in planning and controlling costs.
