White house Production Ltd makes two products, Gel and Zin. Product Gel is made in batches of 40,000 units and product Zin is made in batches of 4,000 units. Each batch
has the following set-up and quantity inspection costs:
• Set-up costs £1,000
Quality inspection costs £500
Each month, White house produces 500,000 units of Gel and 250,000 units of Zin.
At present the company charges overheads (to output/products) on the basis of labour
hours which are 250 hours per week for Gel and 250 hours for Zin.
REQUIRED
(a) Calculate the overheads charged to Gel and Zin each month on the basis of
labour hours

(b) Calculate the overheads charged to Gel and Zin each month, using ACTIVITY
BASED COSTING (ABC) with the cost drivers of set-up and quality
inspections

(c) Discuss the difference between the results of (a) and (b) and explain with
reasons which costing method do you prefer

Aeuropean aircraft producer has spent 15 years in developing a new aircraft that would potential threaten long-lasting boeing's dominance (monopoly) in the same class of aircrafts. the new european aircraft gets high marks on all performance measures except noise. because of the noise, the european producers management is concerned that the us government may impose restrictions which would forbid their aircraft to land in some of the american airports. without restrictions the estimated (present discounted) profit would be 125 million usd. with the restrictions the profit would only be 25 million usd. the chances of both outcomes are estimated to be 50-50. management must decide now whether to the cost of redesign program problem and a 60% chance it will fail. should the european aircraft producer start the noise redesign program if they do not have any redesign parts of the aircraft to solve the noise problem. is 25 million usd. there is a 40% chance that redesign will solve the noise additional information than mentioned above? draw the decision tree, indicate probabilities and outcomes of the events * imagine that the company could find out in advance the outcome of the u.s. government's e find the expected value of perfect information about the u.s. government's decision. decision. draw a new decision tree, indicate probabilities and outcomes of the events.