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Hi Sir,
I’m working on the KAPLAN kit and I found this question – number 125:Material A : 500 kg needed but the company has 200 kg instock. Stock Item was bought 3 months ago @ $5kg / kg but has suffered 10% shrinkage. Material A is no longer in use and would have to be disposed at a cost to Appler of $400 in total. the current purchase price of Material A is $6.25 / kg.
In the answer it says that I will use 200 kg in-stock and buy 300 kg.
If the 200 kg instock have suffered 10% shrinkage, I only have 180 kg to use and I need to buy the remaining 320 kg at $6.25 / kg. Why is the shrinkage not considered?
Thanks
I do not have the Kaplan Kit (only the BPP Kit).
However on what you have typed, the question specifically says that they have 200 kg in stock. OK it has suffered shrinkage, but that means that they must have bought more than 200 kg initially and that after the shrinkage they are left with 200 kg.
In fact they must have initially bought 200 x 100/90 = 222.22 kgs. It has shrunk by 10% x 222.22 = 22.22kgs, and so they are now left with 222.22 – 22.22 = 200 kgs.
However the amount they initially paid (to end up with the 200 kgs) is 222.22 x $5 = $1,111
(Without seeing the actual question I don’t know if my last line is needed for the answer 🙂 )Yes you are right, I misunderstood the meaning.
“They have 200kg in stock present”
“The stock items were bought 3 months ago but have suffered shrinkage since that date”Thanks alot for your help, really appreciate your reply
Jonathan Schembri
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