ECONOMICS

Detailed explanation-1: -The range over which a company expects to operate during a year is called the relevant range of the activity index. Mixed costs change proportionately with changes in the activity level. At the break-even point, contribution margin equals total variable costs.

Detailed explanation-2: -The relevant range is the range of activity (e.g., production or sales) over which these relationships are valid. For example, if the factory is operating at capacity, increasing production requires additional investment in fixed costs to expand the facility or to lease or build another factory.

Detailed explanation-3: -Answer: a) Total fixed costs will not change The relevant range is the level of activity wherein total fixed costs and variable cost per unit are expected to be unchanged.

Detailed explanation-4: -Cost behavior is nothing more than the sensitivity of costs to changes in production or sales volume. The range of output or sales over which cost behavior patterns remain unchanged is called the relevant range.

Detailed explanation-5: -Answer and Explanation: Relevant range is the range of activity within which cost behavior assumptions are valid. It refers to a range composed of a highest activity and lowest activity, wherein sales price per unit, variable cost per unit, and total fixed costs would be assumed to be the same or fixed.