In the specification analysis, the assumptions related to linearity states but linearity must be within ____________?
Correct answer: D. relevant range
- A. irrelevant range
- B. insignificant range
- C. significant range
- D. relevant range
Explanation
Cost linearity is assumed only within the relevant range, where fixed costs remain fixed and variable cost per unit is reasonably constant. Outside that range, capacity changes can alter the cost pattern.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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