relevant range
Financial Dictionary — Cost Accounting
Definition
The relevant range is usually used to describe fixed costs. We often say that fixed costs will not change as volume changes. However, if the size triples, there will likely be more fixed costs as the company will need more space and more managers. Accordingly, we point out that costs are fixed only within an appropriate or reasonable range of activities.
Use cases, Example & Why it matters
Use cases
- Used in product/service costing, budgeting, and variance analysis.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.
- Used to support pricing decisions and profitability analysis by cost behavior and drivers.
Example
- Example: The costing team uses **relevant range** to allocate costs and analyze margins by product line.
Why it matters
- Why it matters: Improves cost accuracy, supports better pricing and budgeting, and strengthens performance measurement.