Question

Define the term “relevant range.” Why is it important to managers? Give examples.

Answer 1

the term relevant range refers to normal range of minimum and maximum no of volume which can be produced within a boundaries of certain expenses.

the fixed expenses is charged as per the range of volume activity, if production activity is increased as compared to relevant range than fixed expenses increase too.

the format of relevant range is important in two ways  for management:

A. Budgeting

B. Cost accounting

A. Budgeting : the company prepare budget for its upcoming period , the assumption is taking that a production volume fall in the relevant range although due to that assumption expense and revenue is estimated and there are likely to be adequate with some minor changes or modifications.

B, Cost Accounting : The expected expense of an item, administration, or action is probably going to be legitimate inside an important range, and less substantial outside of that range. specifically, a "fixed" cost is probably going to stay fixed distinctly inside an applicable scope of movement. Likewise, volume limits from providers are substantial for certain buying volume amounts.

ALL THE PLANNING AND CONTROLLING ARE BASED ON RELEVANT RANGE .