Define the term "relevant range" and explain its importance in understanding cost behavior.
What will be an ideal response?
The relevant range is the range of activity within which management expects a company to operate. This can be based on past experience and/or sales projections.
This concept is important because management need not concern itself with extremely high or low levels of activity that are unlikely to occur. Also, observed cost relationships are typically valid within the relevant range and can therefore be used for purposes of estimation at other levels within that range.
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