Reporting risks is always a most important managerial task. Ten risks have been identified below on a
Question:
Reporting risks is always a most important managerial task. Ten risks have been identified below on a 5x5 risk chart. Calculate the total budget (minimum & maximum) required to eliminate the high and medium level risks if, in average, fixing a medium risk requires 2500 LOC and fixing a high risk requires 4500 LOC. The cost per LOC is set at $ 25.00.
The assumed probability ranges are as follows:
Level 1: < 5%; Level 2: between 5 and 20%; Level 3: between 20% and 50%; Level 4: between 50% and 80%. High likelihood is above 80%.
ANSWER:
Total cost range to eliminate the medium risks:
[5pts] Low Value:
[5pts] High Value:
Total cost range to eliminate the high risks:
[5pts] Low Value:
[5pts] High Value:
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Total budget needed to eliminate all medium & high risks:
[5pts] Low Value:
[5pts] High Value:
Accounting For Managers Interpreting Accounting Information for Decision Making
ISBN: 978-1119979678
4th edition
Authors: Paul M. Collier