What Is a Relevant Range?

Related range (Relevant range) In management accounting, the specific range of changes in period and business volume that do not change fixed costs and variable cost patterns is referred to as the broad range of correlations, and the specific range of business factors is referred to as the narrow range of correlations. range.

Relevant range

Whether studying fixed costs or

The relevant range is assumed to assume that fixed costs and variable costs maintain their cost characteristics over a certain period of time and a certain range of business volume, the former being fixed and the latter changing in proportion;

Due to the existence of a range of fixed costs and variable costs, the nature of each cost has the characteristics of relativity, temporaryness and convertibility. Therefore, there should be no absolute understanding of cost behavior. ^[1]

(1) The relativity of cost behavior means that in the same period, the same cost item may have different behaviors between different enterprises, so we cannot blindly copy the conclusions of other people's existing cost patterns.

(2) The temporary nature of the cost pattern means that, for the same enterprise, the same cost item may have different behaviors at different times. Therefore, companies must often conduct cost behavior analysis based on changes, and cannot mechanically treat past analysis conclusions as static.

(3) The transformability of cost patterns means that certain cost items can be converted between fixed costs and variable costs at the same time. For example, the air freight rent paid by the air transport company is a fixed cost when the aircraft is chartered for a long time, and a variable cost when the space is temporarily rented. ^[1]