Question

What effect do high overhead costs have on the riskiness of a product?

a.

They decrease the risk by ensuring higher profits.

b.

They stabilize the product's performance.

c.

They increase the risk by creating uncertainty about cost recovery.

d.

They reduce the need for financial planning.

Answer: (c).They increase the risk by creating uncertainty about cost recovery. Explanation:High overhead costs raise concerns about the company's ability to recoup these expenses, especially if sales are lower than expected or persistency rates are low. This uncertainty about cost recovery adds to the riskiness of the product.

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Q. What effect do high overhead costs have on the riskiness of a product?

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