Question

Relevant range is the range of activityâ (volume) over which total fixed costs and variable costs per unit can be assumed to remain the same.A. TrueB. False

Answer 1

Answer:

A. True

Explanation:

An important assumption used in Cost Volume Profit Analysis is the use of a relative range.

The term relative range is used to refer to the output range at which the firm expects to be operating within a short - term planning horizon. It is here that, total fixed costs and variable costs per unit can be assumed to remain the same.

However, it is important to note that the Economist looks at the whole range of output from zero to maximum and does not use this term at all. Hence, on their assumption total fixed costs and variable costs per unit will never remain the same.