Question

Managers always need to keep their relevant range in mind when predicting total costs. The relevant range is the band of volume where total fixed costs remain constant as well as where variable cost per unit remains constant. A change in the relevant range can lead to a change in cost behavior. Increasing the relevant range can turn a:
A) Fixed cost into a step fixed costB) Fixed cost into a variable costC) Variable cost into a fixed costD) Step cost into a mixed cost

Answer 1

Answer:

A) Fixed cost into a step fixed cost

Explanation:

As mentioned, a change in the relevant range can lead to a change in cost behavior. By increasing the relevant range, it can turn the fixed cost into a step fixed cost.

The fixed costs of a certain company will always be fixed only in a certain level of relevant range. But when a certain activity level will increase or decrease beyond the threshold, fixed costs change into step fixed costs.