One way to control the effects of a nonlinear relation between total costs and volume is reduce the relevant range.

Question

Quizplus · Accepted Answer

By reducing the relevant range, we can limit the impact of any nonlinearity in the cost-volume relation. This is because as we move away from the relevant range, the assumptions underlying the linear relation between costs and volume are likely to become less accurate. By keeping our analysis within the relevant range, we can better control for any nonlinearity that might be present.

One Way to Control the Effects of a Nonlinear Relation