Question

for what type of cost do we use term ''relevant range''? how it affects to identify the cost type ?

Answer 1

Solution. An organization operating in today's global competitive economic market needs to prepare financial statements along with social accounting to sustain. While operating it incurs various cost to produce goods or services. Relevant range encompasses the level of volume where organization's costs remain unchanged while operation and facilitates budgeting process during an accounting period.

It forms the basis of organization's planning and controlling process where fixed cost remains unchanged and variable cost does not alter as volume. If the volume lies within the set relevant range, costs and revenue predictions remain the same whereas, if the volume exceeds or falls short of set relevant range, costs differ from determined numbers.