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Horngren'S Financial And Managerial Accounting
Found in: Page 1119

Short Answer

What is the relevant range?

The range where the variable cost per unit and fixed cost remains constant is known as the relevant range.

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Step by Step Solution

Meaning of relevant range

The relevant range refers to the range in which adding new unit will does not bring change in variable cost and fixed cost per unit.

Example of the relevant range

Suppose a company wants to produce 100 pens. The costs related to production are as follows:

Number of pens produced

Fixed cost

Variable cost

0-50

$1,000

$0.25 per unit

51-100

$1,500

$0.45 per unit

101-150

$2,000

$0.60

Therefore, the relevant cost in the given example is 51-100 pens.

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