Question

Does the concept of relevant range apply to fixed costs? Please explain your answer. IN YOUR OWN WORDS

Answer 1

No doubt concept of relevant range apply to fixed costs but it does not only apply to fixed costs because it also apply to variable costs and selling prices also.

As we know for relevant range fixed costs remain fixed hence no additional fixed costs will be required for a certain range of operations that is why concept of relevant range apply to fixed costs.

Concept of relevant range also apply to variable costs because for a certain range of output and operations per unit fixed costs will remain same but after that relevant range per unit variable costs will change. That is why it is true that concept of relevant range apply to variable costs also.

Apart from this concept of relevant range also apply to selling price because for a specified range selling price may be same but after that range selling price may change.