The range of operations that falls within the capacity of the current level of fixed costs is referred to as the:
A) Linear average
B) Relevant range
C) Marginal range
D) Operating range

Question

Quizplus · Accepted Answer

When developing a cost model for a firm or segment of a firm, that model is only relevant within the range of capacity of the fixed costs. For example if the current level of fixed cost of $10 million represents a capacity of 2 million units of output, that cost model cannot be used to estimate the cost of producing more than 2 million units.

The Range of Operations That Falls Within the Capacity of the Current