During 2014, Safin Pharmaceutical Company incurred $35,000,000 of research and development (R&D) costs to develop a new hay fever drug
Packaging, shipping, and sales commissions are expected to be $3 per unit. Safin expects to sell 5,000,000 units of Allergone before developing a new drug to replace it in the market. During 2014, Safin produced 800,000 units of Allergone and sold 600,000 of them.
a. Identify the upstream and downstream costs.
b. Determine the 2014 amount of cost of goods sold and the December 31, 2014, ending inventory balance.
c. Determine the unit sales price Safin should establish assuming it desires to earn a profit margin equal to 40 percent of the total cost of developing, manufacturing, and distributing Allergone.
d. Prepare an income statement for 2014 using the sales price from Requirement c.
e. Why would Safin price Allergone at a level that would generate a loss for 2014?
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula Ending Inventory Formula =...
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Chapter # 1
Section: EXERCISES SERIES B
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Question Posted: February 07, 2014 10:10:24