Question

I want to talk about the relevant range is the range :Relevant range::Cost behaviorrelevant range:of the volume of activity where total fixed costs remain constant and the variable cost per unit remains constant. Can someone provide an example?

Answer 1

The relevant Range

Relevant Range refers to limited span of volume or activity.
With in this span of volume or activity, certain level costs (Fixed cost & Variable Cost) occurs where total fixed costs remain constant and the variable cost per unit remains constant.
Out side of this relavant range, the cost behaviour often changes.

Example -
ABC co. produces within the range of 10,000 to 13,000 units.
Within this range its monthly fixed cost (like supervisor's salary, rent etc) is $100,000.
If volume dropped below this range, say 9000 units, then the company would reduce no of supervisors and rented the unused space. As a result total fixed cost would decrease.
If volume raised above the range, say 14000 units, the company would required more suprervisors and need more space to manufacture units. As a result, total fixed cost would increase.

So, we can see, with in the range of 10,000 to 13,000 units production, there is no change in fixed costs. So, this is a relavant range to the company.