Question

4. J. P. Alexander claims that the relevant range concept is important only for variable costs.

a. Explain the relevant range concept.

b. Do you agree with J. P.'s claim? Explain.

Answer 1

Answer-:

4.

a). Relevant range is a range in which a particular business entity expects to carry out its operations. Besides this, particularly in the cost behavior analysis context, it refers to the activity range through which specific behaviors of costs are presumed to be right and true.Furthermore, for the activity levels that are outside the relevant range, the cost behaviors could as well be entirely and utterly different than such cost behaviors within the applicable orappropriate range.

b). I disagree with J.P.'s claim because The behavior of both fixed and variable costs are linear only over a certain range of activity. CVP analysis is based on the assumption that both fixed and variable costs remain linear within the relevant range.

Thankyou............