The relevant range refers to a specific activity level that is bounded by a minimum and maximum amount. Within the designated boundaries, certain revenue or expense levels can be expected to occur. Outside of that relevant range, revenues and expenses will likely differ from the expected amount. The concept of the relevant range is particularly useful in two forms of analysis, which are noted below. Show
Budgeting Relevant RangeWhen a company constructs a budget for a future period, it makes assumptions about the relevant range of activities within which the business is likely to operate. As long as the actual activity volume falls somewhere within the relevant range, and other assumptions are valid, budgeted revenues and expenses are more likely to be correct. In this case, the relevant range is most likely to be fairly close to the current activity level of a business, with minor modifications. Cost Accounting Relevant RangeThe assumed cost of a product, service, or activity is likely to be valid within a relevant range, and less valid outside of that range. in particular, a "fixed" cost is likely to remain fixed only within a relevant range of activity. Also, volume discounts from suppliers are only valid for certain purchasing volume quantities. Examples of Relevant RangeFor example, ABC Company constructs a budget within a relevant revenue range of no more than $20 million. If actual sales were to exceed that amount, then ABC would need to construct a new manufacturing facility. As another example, ABC Company assumes that the cost of a green widget is $10.00 within a relevant range of no less than 5,000 units per year and no more than 15,000 units per year. If the actual unit volume is less than 5,000 units, the purchased cost of materials increases sufficiently to make the assumed cost of $10.00 per unit too low. Conversely, if the actual unit volume is higher than 15,000 units, the purchased cost of materials decreases sufficiently to make the assumed cost of $10.00 per unit too high. As a third example, if ABC Company were to produce more than 20,000 of its yellow LED lights, it would need a third shift to produce them, which would require an additional $70,000 annual salary for a shift supervisor. Thus, the initial cost of the LED light is only valid for a relevant range that stops at 20,000 units. Above that amount, a new relevant range can be assumed for a different cost that assumes the inclusion of the cost of the shift supervisor in the cost of the product. As a fourth example, ABC Company constructs a manufacturing facility, which has a fixed cost of $10 million to operate and maintain every year. However, if production levels exceed 3 million units per year, then this fixed cost will increase, because of additional wear and tear on the facility. Thus, the relevant range of this fixed cost is up to a maximum of 3 million units per year. Cost behavior often changes outside of the relevant range of activity due to a change in the fixed costs. When volume increases to a certain point, more fixed costs will have to be added. When volume shrinks significantly, some fixed costs could be eliminated. Here's an illustration. A company manufactures products in its 100,000 square foot plant. The company's depreciation on the plant is $1,000,000 per year. The capacity of the plant is 500,000 units of output and its normal output is 400,000 units per year. When the company is manufacturing between 300,000 and 500,000 units, it needs salaried managers earning $400,000 per year. Below 300,000 units of output, some of the salaried manager positions would be eliminated. Above 500,000 units, the company will need to add plant space and managers. For this example, the relevant range is between 300,000 units and 500,000 units of output per year. In that range the total of the two fixed costs is $1,400,000 per year. Below 300,000 units, the fixed costs will drop to less than $1,400,000 because some salaries will be eliminated and some of the space might be rented. When the volume exceeds 500,000 units per year, the company will need to add fixed costs because of the additional space and the additional managers. Perhaps the total fixed costs will be $2,000,000 for output between 500,000 units and 700,000 units. Statistics Explained, your guide to European statistics. Statistics Explained is an official Eurostat website presenting statistical topics in an easily understandable way. Together, the articles make up an encyclopedia of European statistics for everyone, completed by a statistical glossary clarifying all terms used and by numerous links to further information and the latest data and metadata, a portal for occasional and regular users. New / updated articlesPoultry statistics New 22/12/2022 In 2021, the EU produced an estimated 96 billion eggs for consumption, of which the overwhelming majority came from farms with more than 5 000 laying hens. More ... Returns of irregular migrants - quarterly statistics Updated 22/12/2022 In the third quarter of 2022, the total number of non-EU citizens ordered to leave the territory of an EU Member State was 109 895. It was up 14 % compared with the second quarter of 2022, and also an increase of 31 % compared with the same period of 2021 (see Table 1). Among the EU Member States, the largest number was reported by France, followed by Croatia and Greece. These three EU Member States altogether accounted for almost half (51 %) of all third-country nationals ordered to leave during the third quarter of 2022. More ... Asylum applications - monthly statistics Updated 22/12/2022 In September 2022, the five EU Member States which received the highest number of first-time asylum applicants were Germany, Austria, France, Spain and Italy, altogether accounting for almost three quarters (74 %) of all first-time applicants in the EU (Map 1). More ... EU imports of energy products - recent developments Updated 22/12/2022 The analysis of the latest figures shows a substantial increase of the energy bill since 2021. In the third quarter of 2022, the average monthly value of imports in energy products continued to increase and grew by 18 % with respect to the second quarter 2022. The increase of the average monthly value with respect to 2021 was equal to 166 %. More ...
Looking for an article on a specific themeGeneral and regional statistics/EU policies Economy and finance Population and social conditions Industry and services Agriculture, forestry and fisheries International trade Transport Environment and energy Science, technology and digital society Looking for an article on a specific themeGeneral and regional statistics/EU policies Economy and finance Population and social conditions Industry and services Agriculture, forestry and fisheries International trade Transport Environment and energy Science, technology and digital society New / updated articlesPoultry statistics New 22/12/2022 In 2021, the EU produced an estimated 96 billion eggs for consumption, of which the overwhelming majority came from farms with more than 5 000 laying hens. More ... Returns of irregular migrants - quarterly statistics Updated 22/12/2022 In the third quarter of 2022, the total number of non-EU citizens ordered to leave the territory of an EU Member State was 109 895. It was up 14 % compared with the second quarter of 2022, and also an increase of 31 % compared with the same period of 2021 (see Table 1). Among the EU Member States, the largest number was reported by France, followed by Croatia and Greece. These three EU Member States altogether accounted for almost half (51 %) of all third-country nationals ordered to leave during the third quarter of 2022. More ... Asylum applications - monthly statistics Updated 22/12/2022 In September 2022, the five EU Member States which received the highest number of first-time asylum applicants were Germany, Austria, France, Spain and Italy, altogether accounting for almost three quarters (74 %) of all first-time applicants in the EU (Map 1). More ... EU imports of energy products - recent developments Updated 22/12/2022 The analysis of the latest figures shows a substantial increase of the energy bill since 2021. In the third quarter of 2022, the average monthly value of imports in energy products continued to increase and grew by 18 % with respect to the second quarter 2022. The increase of the average monthly value with respect to 2021 was equal to 166 %. More ...
Did you know that....In 2021, in the EU, the average age of young people leaving their parental home was 26.5 years. Read more... All articles All online publications Glossary Tutorials Categories Most visited:
 Focus onPassenger cars in the EU More ... Retrieved from "https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Main_Page&oldid=585459" Which costs will change with a change in activity within the relevant range?Unit fixed costs and total variable cost will change with a decrease in activity within the relevant range. Fixed costs are costs that are fixed in total and does not vary in relation to the changes in activity level, therefore as per unit of activity level decreases, the fixed cost per unit would increase.
Which of the following is a cost that changes as the level of activity changes?Variable costs: A variable cost increases or decreases as volume of activity increases or decreases. On a per unit basis, a variable cost per unit remains constant but the total amount of variable cost changes with the level of production. When production volume and variable costs are graphed, a.
What happens when the activity level increases within the relevant range?Answer and Explanation: If the level of activity increases within the relevant range c) total cost will increase and fixed costs per unit will decrease. When the volume of sales increases, this will drive up variable costs and increase total costs compared to the previous total cost (at the lower volume.)
Which costs will not change with a decrease in activity within the relevant range?Total fixed costs remain the same, within the relevant range. However, the fixed cost per unit decreases as production increases, because the same fixed costs are spread over more units. The following two charts depict this relationship between fixed costs and output volume.
|
Which costs will change with a change in activity level within the relevant range?
zusammenhängende Posts
Urheberrechte © © 2024 toptenid.com Inc.
