A company's normal operating range,which excludes extremely high or low operating levels that are not likely to occur,is called the:
A)Margin of safety.
B)Contribution range.
C)Break-even point.
D)Relevant range.
E)High-low point.

Question

Quizplus · Accepted Answer

The relevant range is the range of activity within which assumptions made about cost behavior are valid. So, option D is the correct answer. Option A represents the excess of the actual sales or production over the break-even sales or production. Option B is the area where contribution is positive, and option C is the level of sales at which the company's total revenue equals its total cost. Option E is a method to estimate fixed and variable costs based on the highest and lowest levels of activity in a certain period.

A Company's Normal Operating Range,which Excludes Extremely High or Low