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.

Relevant Range

The range of activity within which the assumptions about variable and fixed costs in a cost model are valid.

GAAP

Generally Accepted Accounting Principles, a collection of commonly-followed accounting rules and standards for financial reporting.

CVP Analysis

A management accounting method used to analyze the impact of varying levels of costs and volume on operating profit.