Q6RQ
Question
What is the relevant range?
Step-by-Step Solution
Verified Answer
The range where the variable cost per unit and fixed cost remains constant is known as the relevant range.
1Meaning of relevant range
The relevant range refers to the range in which adding new unit will does not bring change in variable cost and fixed cost per unit.
2Example of the relevant range
Suppose a company wants to produce 100 pens. The costs related to production are as follows:
Number of pens produced | Fixed cost | Variable cost |
0-50 | $1,000 | $0.25 per unit |
51-100 | $1,500 | $0.45 per unit |
101-150 | $2,000 | $0.60 |
Therefore, the relevant cost in the given example is 51-100 pens.
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