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Combined probability matrix Pilot paper Q3

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › Combined probability matrix Pilot paper Q3

  • This topic has 0 replies, 1 voice, and was last updated 14 years ago by shiba2912.
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  • November 19, 2011 at 3:09 pm #50573
    shiba2912
    Member
    • Topics: 2
    • Replies: 2
    • ☆

    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.

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