Diversification Can Effectively Reduce Risk

question 24

Multiple Choice

Diversification can effectively reduce risk. Once a portfolio is diversified the type of risk remaining is:

• A) individual security risk.
• B) riskless security risk.
• C) risk related to the market portfolio.
• D) total standard deviations.

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Definitions:

Manufacturing Overhead

Indirect factory-related costs that support the production process but cannot be directly traced to specific products, such as maintenance and utilities.

Traditional Costing System

A cost accounting method that assigns overhead costs to products based on a predetermined overhead rate and actual levels of a cost driver.

Overhead Cost

Indirect expenses related to the general operation of a business, such as rent, utilities, and administrative salaries, not directly tied to any specific product or service.

Direct Labor-Hours

The total hours worked by employees who are directly involved in the production process, often used to allocate manufacturing overhead.