Cost behavior and relevant range

The relevant range defines the limits within which per-unit variable costs remain constant and fixed costs are not changeable. It is synonymous with the short jun.
 A) Variable Costs:

1. Variable cost per unit remains constant in the short run regardless of the level of production.
2. Variable costs in total, on the other hand, vary directly and proportionally with changes in volume.

B) Fixed Costs:

1. Fixed costs in total remain unchanged in the short run regardless of production level.
2. Fixed cost per unit, on the other hand, varies indirectly with the activity level.

C) Mixed (semi-variable) costs:
combine fixed and variable elements, e.g., rental expense on a car that carries a flat fee per month plus an additional fee for each mile driven.

Sometimes the fixed and variable portions of a mixed cost are not set by contract and thus must be estimated. Two methods of estimating mixed costs are in general use:

1. The high-low method is the less accurate but the quicker of the two methods:The difference in cost between the highest and lowest levels of activity is divided by the difference in the activity level to arrive at the variable portion of the cost.
2. The regression (scattergraph) method: is considerably more complex and determines the average rate of variability of a mixed cost rather than the variability between the high and low points in the range.