A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the:Group of answer choicesrelevant rangeaverage rangecost driver rangecost-allocation rangeNext
Question
A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the:Group of answer choicesrelevant rangeaverage rangecost driver rangecost-allocation rangeNext
Solution
The answer is "relevant range".
Here's why:
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The relevant range is a term used in managerial accounting that refers to a specific activity level that is bounded by minimum and maximum amounts. Within this range, certain assumptions about business operations hold true.
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Within the relevant range, costs can be accurately estimated and the relationship between cost and volume is linear. This means that costs will increase or decrease in a predictable manner as volume changes.
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The relevant range is important for budgeting, cost control, and decision-making purposes. It helps managers understand the cost behavior and predict future costs based on the expected level of activity.
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The other terms - average range, cost driver range, and cost-allocation range - are not standard terms used in managerial accounting to describe this concept.
Therefore, a band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the relevant range.
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