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:

Utility Function

A mathematical representation of a consumer's preference ranking for various bundles of goods, used in economics to analyze consumer behavior.

Barbie's Preferences

This term does not reference a recognized economic concept, but could figuratively refer to a theoretical model of consumer choice or preference, using Barbie as an example.

Good 1

Good 1 typically refers to a specific item or product in economic models, representing a variable used to analyze various economic scenarios.

Price Elasticity

An indicator of the sensitivity of the demand for a product to shifts in its price.