The relevant range of Zhang Company is between 110,000 units and 190,000 units per month.If the company produces beyond 190,000 units per month ________.
A) the fixed costs will remain the same, but the variable cost per unit may change
B) the fixed costs may change, but the variable cost per unit will remain the same
C) the fixed costs and the variable cost per unit will not change
D) both the fixed costs and the variable cost per unit may change

Question

Quizplus · Accepted Answer

If the company produces beyond the relevant range of 110,000 to 190,000 units per month, both the fixed costs and the variable cost per unit may change. Fixed costs may increase if additional equipment, space or personnel are required to accommodate the increased production, while variable costs may increase due to bulk purchase of raw materials, production inefficiencies or maintenance costs. Therefore, option D is the best choice.

The Relevant Range of Zhang Company Is Between 110,000 Units