Which Statement Is True Concerning the Inclusion of Risk in Any

question 20

Multiple Choice

Which statement is true concerning the inclusion of risk in any retention/transfer decision?

• A)the element of risk can be accurately included in the decision
• B)because risk is a function of a known distribution, there is no need to include it as a factor
• C)since the law of large numbers generally eliminates risk-making outcomes accurately predictable, risk is not a factor except in capital budgeting decisions
• D)because individuals have different risk preferences and attitudes, risk cannot be accurately and consistently factored into the model

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Definitions:

Predetermined Overhead Rate

A rate calculated at the beginning of an accounting period, used to allocate overhead costs to products or job orders based on a certain activity.

Customizing Department

A specialized division within a company dedicated to tailoring products or services to individual customer specifications or preferences.

Job-Order Costing System

A costing system that accumulates costs individually for each job.

Direct Labor-Hours

The cumulative hours put in by workers directly engaged in the process of manufacturing or in delivering services.