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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
1.40Chemical X: order conversion:
Low to medium
Medium to high
Low to high
Medium to low
High to medium
High to low0.10
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.Please do not type out full question like this – there are copyright issues.
I cannot give you an answer because I do only have the BPP Revision Kit – not the Kaplan kit.
You are welcome (and in fact I do recognise the question – it is a very old question from Paper P5. I don’t know why Kaplan have included it in their F5 Exam Kit! F5 is hard, but not that hard 🙂 )
Sir, on the same question how did they calculate the cost of chemical x? They got 300000*1.60=480000
As I wrote in my reply to lily1996 (above), I do not have the Kaplan Exam Kit (only the BPP Revision Kit) and so I do not have the question.
As I also wrote in my reply, this question was originally set for Paper P5 (which is now Paper APM) and could not possible be asked in Paper PM (which was Paper F5). I do not know why Kaplan seem to have it in the Paper PM Exam Kit (unless they have changed it to make it easier).
Unless Kaplan have changed the question, then the cost of chemical X is not always 1.60 per Kg – it depends on how many kgs were originally ordered and how many actually turn out to be needed. If they originally ordered 50,000 but then only needed 30,000 then they will have to change the order from high to low and therefore pay a premium of 0.60 above the price they were originally expecting which was $1.00. They will therefore end up paying $1.60 for each of the 30,000 kgs they end up getting.
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