Which Risk Management Alternative Is Feasible When the Likelihood of an Event

question 64

Multiple Choice

Which risk management alternative is feasible when the likelihood of an event that could cause a financial loss is very low and the potential financial loss due to the event is small?

• A) Avoid risk
• B) Reduce risk
• C) Accept risk
• D) Insure against risk

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Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product.

Indirect Materials

Materials used in the production process that cannot be directly linked to a specific product, such as lubricants and cleaning supplies used on machinery.

Manufacturing Overhead

All indirect costs associated with manufacturing a product, such as utilities, rent, and salaries for employees not directly involved in production.

T-Accounts

A simplified accounting tool that represents a ledger account and is used to understand the effects of transactions on account balances.