Three Questions May Be Useful in Determining the Amount of Risk

question 10

Essay

Three questions may be useful in determining the amount of risk involved in a decision.What are these questions and how do they relate to risk and the probability of failure?

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Definitions:

Capacity

The maximum amount or number that can be received or contained, commonly used in reference to production and manufacturing capabilities.

Utilization

The proportion of the available time that a system, machine, or service is operating or being used.

Break-Even Point

The production level or sales volume at which total revenues equal total expenses, resulting in neither profit nor loss.

Variable Costs

Costs that change in proportion to the level of production or sales activities, such as materials and labor.