Cost Behavior Patterns

Question 1

Define “relevant range”.

Answer 1

1. the range of activity for which the assumptions of cost behavior reasonably hold true
2. the range of activity over which the company plans to operate

Question 2

What is the difference between “mixed costs” and “step-variable costs”?

Answer 2

Mixed costs have a fixed component and a variable component, while step-variable costs remain constant in total over a small range of production levels, but vary with larger changes in production volume