Why Is Identification of a Relevant Range Important

question 201

Multiple Choice

Why is identification of a relevant range important?

• A) It is required under GAAP.
• B) Cost behavior outside of the relevant range is not linear which distorts CVP analysis.
• C) It directly impacts the number of units of product a customer buys.
• D) It is a cost that is incurred by a company that must be accounted for.

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Definitions:

Financial Statements

Consolidated reports created from a company's accounting data, including the balance sheet, income statement, and cash flow statement, used to communicate the financial performance and condition of the company.

Reporting Period

The specific span of time covered by financial statements, typically a fiscal quarter or year, over which a company reports its financial performance.

Footnotes

Additional notes provided in financial statements offering more detailed information about the accounts and policies applied.

Limitations

Restrictions or constraints that affect the scope, effectiveness, or applicability of something.