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The relevant range of activity refers to a the current level of production. If production drops or increases, then the relevant range will change.
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∙ 9y ago
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What happens as the level of activity decrease within the relevant range?
Although fixed cost per unit decreases with increases in activity levels, total fixed cost is not affected by changes in the activity level within the relevant range.
Will total variable costs increase if the level of activity increases within the relevant range?
yes
An increase in the activity level within the relevant range results in?
A decrease in fixed cost per unit
Which cost will change with a decrease in activity within relevant range?
unit fixed costs and total variable cost
What happens Cost driver activity level increases within the relevant range?
total fixed costs remain unchanged
What happens as the level of activity decrease within the relevant range?
Although fixed cost per unit decreases with increases in activity levels, total fixed cost is not affected by changes in the activity level within the relevant range.
What does relevant range means?
The span of activity in which a company expects to operate.
What is relevant rang?
Relevant range is an accounting term that pertains to the minimum and maximum value. It sets the cost boundary in a certain activity level.
Will total variable costs increase if the level of activity increases within the relevant range?
yes
An increase in the activity level within the relevant range results in?
A decrease in fixed cost per unit
Define relevant range in accounting?
an increase or decrease on a company's fixed costs is however not only dependent on the relevant period but also on the relevant production range. The total fixed costs will remain constant if the relevant production range can be handled by the same number of production units, producing fewer steps. If a certain step ( certain cost level) encompasses the entire relevant range of activity, the costs are entirely fixed.
Which cost will change with a decrease in activity within relevant range?
unit fixed costs and total variable cost
What happens Cost driver activity level increases within the relevant range?
total fixed costs remain unchanged
Which costs will change with an increase in activity within the relevant range?
Unit Fixed Cost and Total Variable Cost Kenny Kalejaiye
Variable cost fluctuates in total as activity changes but remains constant on a per unit basis over the relevant range true or false?
true
What are the steps to developing a flexible budget?
The flexible budget uses the master budget as its basis. To develop the flexible budget, management should take the following steps. 1. Identify the activity index and the relevant range of activity. 2. Identify the variable costs, and determine the budgeted variable cost per unit of activity for each cost. 3. Identify the fixed costs, and determine the budgeted amount for each cost. 4. Prepare the budget for selected increments of activity within the relevant range.
Why relevant range important?
outside the relevant range, variable cost and fixed cost behaviors patterns may change
