When the Dispersion of Possible Returns Is Irrelevant, the Decision

question 40

Multiple Choice

When the dispersion of possible returns is irrelevant, the decision maker is said to be:

• A) risk averse.
• B) risk neutral.
• C) risk seeking.
• D) none of these.

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Definitions:

Variable Components

Variable components are costs or elements of a product, service, or project that change in proportion with the level of activity or volume.

Fixed Components

Parts of a budget or costs that remain constant regardless of the level of production or business activity.

Direct Materials Cost

The cost of raw materials that are directly traceable to the manufacturing of a product.

Break-Even Point

The level of production or sales at which total revenues equal total expenses, resulting in no net loss or gain.