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Part b (i) (ii).
(i) A fall of 12% from the current level would result in a unit cost of £41.21 x 88% = £36.26. However, the combined
probability of this cost level being achieved is only 18% (this can be abstracted from the probability matrix). This might,
therefore, be seen as a ‘risk seeking’ stance if management decide to proceed with the re-design.I want to know how this 18% was calculated.
(ii) Other members of the management team are not willing to proceed with the re-design if it might lead to a cost increase from the current level. There is a 32% combined probability that the changes could result in a unit cost greater than the
current level of £41.21. But there is also a 66% likelihood that the unit cost of product A could be less than the current level. This is a ‘risk averse’ stance since management are not swayed by the 66% likelihood that unit costs may fall.Here I want to know how 32% and 66% were calculated.
We used to stuck at this question when we were doing acca, here’s the tech.
(i): See both tables Upper table and Lower table named as NUMBER OF CUTS.
Now u have to find which figs are less then 36.26.
So look at the above table: Under 25(cuts) and .5(timber)= 36.07 is lower then 36.26.
Now look at the lower table now with probabilities, calculate (32.28 to 36.07)
.02+.03+.03+.01+.01+.08= .18*100= 18%(ii) Now same Case now u have to look for more then 41.21.
Now look at the 1st table then 2nd for the calculation of Probabs.
No. of cuts: 50 timber .6: from 41.87 to 49.21 (These all r above 41.21)
So now look at the lower table and calculate: (41.87 to 49.21) .02+.04+.06+.06+.02+.02+.02+.03+.03+.01+.01= .32*100= 32%Best Of Luck.
@mrfaizankhan can you also explain me Q1 part c from Pilot paper.
Note:
Attributable income (budget) = (Number of government funded patients = (14,600 x 80%) = 11,680 x 50% = 5,840 x
£1,000 = £5,840,000.
Attributable income (actual) = (Number of government funded patients = 14,600 x 80%) = 11,680 x 75% = 8,760 x
£1,000 = £8,760,000.I did not understand how it was calculated. Where did the figure 14,600 come from?
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