This video discusses the relevant range in Managerial Accounting.
The relevant range is the range of activity for which assumptions about the company's cost behavior are valid. If you start a restaurant and pay $3,000 a month for rent, this rent will behave as a fixed cost; whether you have 10 customers or 50 customers, the rent remains the same. However, this assumption is only valid for a certain range of activity; if you have 5 million customers, for example, you might need a much larger restaurant, in which case your rent cost will significantly increase. Thus, a company might say that a cost is fixed for a range from a range of 0 customers to 2,000 customers.
Relevant range is an important concept because costs will frequently change their behavior outside of the relevant range.
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20 окт 2024