Question

Which of the following is likely to contain a linear relationship between costs and activities?

a Full capacity.

b Relevant range.

c Small-scale operations.

d The entire range of possible activity.

Answer 1

The likely option to contain a linear relationship between costs and activities is the relevant range.

Step-by-step explanation:

A linear relationship between costs and activities implies that the cost per unit remains constant as the level of activity increases or decreases. In this context, the likely option to contain a linear relationship between costs and activities is the relevant range. The relevant range represents the range of activity levels where the company expects to operate under normal conditions. Within the relevant range, the cost per unit will generally remain relatively stable.