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Explain what the meaning of the Relevant range. Explain how the relevant range changes for variable...

Explain what the meaning of the Relevant range. Explain how the relevant range changes for variable cost behavior (curvilinear cost behavior) and how the relevant range changes for fixed cost behavior (stepped cost behavior). (100 to 200 words)

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Expert Solution

A relevant range is the range of activity for which the cost behaviour is defined and it is valid only for the given range of activity. The variable cost per unit is constant and fixed cost is constant at overall level within the relevant range.

A curvilinear cost is a non linear cost and it varies at inconsistency rate as production volume increases. This is irregular rate that increase at different rates as total output increases. Thus a relevant range should be defined for non curvilinear cost which will change beyond the range. Within the defined range the curvilinear cost is assumed to be linear and constant at per unit level.

The fixed cost is constant for a relevant range of activity. Beyond this range of activity the fixed cost defined is not valid and it increases for the next range of activity. For example: electricity cost, utilities cost, factory supplies cost. They increase in a step way and fixed cost defined is valid for a range of activity only.

ekkarill92 answered 1 year ago
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