Final answer:
The statement regarding the relevant range of the activity index being the operating range a company expects to maintain over a year is true. This concept is pivotal in managerial accounting for predicting costs based on anticipated production levels, similar to how confidence intervals are used to estimate proportions in various interest areas for investors and businesses.
Step-by-step explanation:
The statement that the range over which a company expects to operate during a year is called the relevant range of the activity index is true. The relevant range refers to the span of operational activity that a company anticipates undergoing, within which its fixed and variable costs, production capabilities, and sales volumes are expected to hold consistent per unit rates and behaviors. This concept is critical in managerial accounting and budgeting, as it provides a framework for companies to predict financial and operational outcomes based on the expected level of activity.
For example, a company's budget for manufacturing costs such as raw materials, labor, and overhead would be based on a forecasted range of production units. If production falls within this relevant range, the cost predictions should be accurate. However, if production exceeds or falls short of this range, costs may vary, leading to the need for adjustments.
Investors in the stock market and businesses in various sectors, such as those selling personal computers, are interested in proportions and percentages that can be estimated using statistical methods like confidence intervals. These are used to predict a range within which a certain proportion lies with a specific degree of certainty. This is related to the concept of the relevant range in that both deal with predictions and estimations based on expected levels of activity or interest within a certain scope or period.