Relevant range
The relevant range is the activity interval over which the assumptions in a cost-behaviour model are expected to hold. Within it, a fixed cost may remain constant and a variable rate may be stable. Crossing the range can require new capacity, change prices or alter efficiency. A forecast should therefore state both the period and activity limits, rather than assuming a fitted straight line remains valid indefinitely.
Worked example
A machine lease costs $5,000 monthly for capacity up to 10,000 units. Forecasting 15,000 units using the same fixed amount is unsafe if another machine must be leased.
Common mistake
A mathematically valid extrapolation is not necessarily an operationally valid forecast outside the observed or contracted activity range.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |