Why is the cost function for the flexible budget only applicable within the relevant range?
A) Management does not expect to have production levels outside of the relevant range
B) The cost levels affect the range of production levels available
C) Some costs will behave differently outside of the relevant range
D) Only the static budget matters when compared with results outside of the relevant range
E) None of the above

Question

Quizplus · Accepted Answer

Some costs will behave differently outside of the relevant range, meaning the assumptions about cost behavior (fixed, variable, and mixed costs) used to create the flexible budget are only accurate within that predefined range.

Why Is the Cost Function for the Flexible Budget Only