Outside the relevant range, variable costs, such as direct material costs ________.
A) will decrease proportionately with changes in sales volumes
B) will remain the same with changes in production volumes
C) will not change proportionately with changes in production volumes
D) will increase proportionately with changes in sales volumes

Question

Quizplus · Accepted Answer

Variable costs, such as direct material costs, are expected to change with changes in production volumes within the relevant range. However, outside the relevant range, variable costs may not change proportionately with changes in production or sales volumes. This is because fixed costs begin to play a larger role in determining the overall cost structure of the company outside the relevant range.

Outside the Relevant Range, Variable Costs, Such as Direct Material