When predicting cost behaviour,the volume of production for which the fixed and variable cost relationships are assumed to hold true is called the:
A) relevant cost area.
B) regression area.
C) dependent variable area.
D) relevant range.

Question

Quizplus · Accepted Answer

The volume of production for which the fixed and variable cost relationships are assumed to hold true is called the relevant range. This is the range of activity where the behavior of the cost can be reliably predicted using the assumptions made about fixed and variable costs. Beyond this range, cost behavior is likely to change and the assumptions may not hold true. Therefore, it is important to recognize and understand the relevant range when predicting cost behavior.

When Predicting Cost Behaviour,the Volume of Production for Which the Fixed