Question

3. The concept that allows us to linearize nonlinear cost behavior patterns within certain boun ds...

3. The concept that allows us to linearize nonlinear cost behavior patterns within certain boun ds of activity is known as the _________ ________

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Answer #1

Relevant range

Explanation:

Non-linear cost behaviour is a cost behaviour which is not in line with activity levels. The cost moves at irregular levels. The relevant range is the range of activity which assumes the cost behaviour is linear for the given range of activity. In this range of activity the variable cost and fixed cost is defined. The variable cost is constant at per unit level and the fixed cost is fixed at overall level. The cost is defined as a linear cost pattern since it helps in analysing the cost and taking decision within the relevant range. Beyond this relevant range the variable cost and fixed cost are bound to change because at overall level they have a nonlinear cost behaviour pattern

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