1. Why do managers consider direct costs to be more accurate than indirect costs?

The direct expenses that may be linked to a certain cost object are more
precisely assigned to that cost object than indirect allocated costs.

2. Why is it necessary for a company to specify a relevant range of activity when making
assumptions about cost behavior?
A relevant range is an activity level that is indicated by a minimum and maximum
value. Within the set boundaries, it can estimate certain levels of spending or revenue. It is
necessary in making assumptions regarding cost behavior because thinking that all of your
expenses—fixed or variable—will remain constant could result in poor decision-making. Ignoring
relevant ranges would result in capacity concerns, where you may not be aware that you are
physically unable to supply all of the necessary items since you have suddenly exceeded your
capacity.

3. How does cost, expense, and loss differ from each other? Explain.
Cost, expenses and loss are all outflow funds from the firm that goes to the
outside world. The only difference is the manner of how the outflow of cash happens. Cost is the
money that the firm spends on the creation or production of goods or services. There are
expired costs which is the cost that has been already incurred and deferred cost is one which
has been incurred but its economic benefit is not received. Expenses are an expired cost. It is a
cost with a matching economic benefit during a particular period. On the other hand, losses are
the outflow of funds or cash which arises not due to business transactions but due to some
other events.