Question

According to its 2011 annual report, CVS Caremark and its subsidiaries is the largest provider of pharmacy health care in the United States, filling or managing more than one billion prescriptions annually. The company achieves this volume of prescriptions through a combination of its pharmacy benefit management, mail order, and specialty pharmacy division, Caremark Pharmacy Services; its more than 7,300 retail drugstores; its retail-based health clinic subsidiary, MinuteClinic; and its online pharmacy, CVS.com. It organizes its business into three reportable business segments, the Pharmacy Services segment, the Retail Pharmacy segment, and the corporate segment. The Pharmacy Services and Retail Pharmacy segments are the operating units. The Corporate segment does not generate revenue. Rather, it provides management and administrative services, such as human resources, legal, compliance, information technology, and finance, to the operating segments. The following information is from CVS Caremark’s 2011 annual report. Intersegment eliminations relate to intersegment revenues that occur when a Pharmacy Services segment customer uses a Retail Pharmacy segment store to purchase covered products. When this occurs, both segments record the revenue on a stand-alone basis.


1. Compute the gross profit rate for
(a) The Pharmacy Services segment,
(b) The Retail Pharmacy segment,
(c) CVS Caremark.
2. Compute the operating profit rate for
(a) The Pharmacy Services segment,
(b) The Retail Pharmacy segment
(c) CVS Caremark.
3. Do both segments contribute equally to the profitability of CVS Caremark?Explain.


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  • CreatedFebruary 20, 2015
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