Risk and uncertainty

Hi John, I want to ask with regards to acca f5 kaplan question 29 Aluminium extracted from the waste is 15% of the waste input. Chemical X is added to the reprocessing at the rate of 1 kg per 100 kg of waste. What does the sentence above means which I not understand? The question is as shown as below RECYC Recyc plc is a company which reprocesses factory waste in order to extract good quality aluminium. Information concerning its operations is as follows: (1) Recyc plc places an advance order each year for chemical X for use in the aluminium extraction process. It will enter into an advance contract for the coming year for chemical X at one of three levels – high, medium or low, which correspond to the requirements of a high, medium or low level of waste available for reprocessing. (2) The level of waste available will not be known when the advance order for chemical X is entered into. A set of probabilities have been estimated by management as to the likelihood of the quantity of waste being at a high, medium or low level. (3) Where the advance order entered into for chemical X is lower than that required for the level of waste for processing actually received, a discount from the original demand price is allowed by the supplier for the total quantity of chemical X actually required. (4) Where the advance order entered into for chemical X is in excess of that required to satisfy the actual level of waste for reprocessing, a penalty payment in excess of the original demand price is payable for the total quantity of chemical X actually required. A summary of the information relating to the above points is as follows: Chemical X costs per kg Level of reprocessing Waste available 000 kg Probability Advance order $ Conversion discount $ Conversion premium $ High Medium Low 50,000 38,000 30,000 0.30 0.50 0.20 1.00 1.20 1.40 Chemical X: order conversion: Low to medium Medium to high Low to high Medium to low High to medium High to low 0.10 0.10 0.15 0.25 0.25 0.60 Aluminium is sold at $0.65 per kg. Variable costs (excluding chemical X costs) are 70% of sales revenue. Aluminium extracted from the waste is 15% of the waste input. Chemical X is added to the reprocessing at the rate of 1 kg per 100 kg of waste.