A company's relevant range of production is:
A)The production range from zero to 100% of plant capacity.
B)The production range over which CVP assumptions are valid.
C)The production range beyond the break-even point.
D)The production range that covers fixed but not variable costs.

Question

Quizplus · Accepted Answer

The relevant range of production is the range over which the assumptions made in Cost-Volume-Profit analysis are valid. This includes assumptions such as fixed costs staying constant within the relevant range, variable costs remaining constant per unit, and selling price remaining constant. The relevant range is not necessarily from zero to 100% of plant capacity, as this may exceed the range where these assumptions remain valid. The relevant range also includes production both below and above the break-even point, as long as it falls within the range where CVP assumptions hold.

A Company's Relevant Range of Production Is