Biov

1. A typical 18-wheeler trailer filled 21.33% carries $10 million of Wellbutrin XL tablets. To arrive at this figure, we first computed costs across the value chain, given the wholesale acquisition price:

Wholesaler Cost 　

Margin= (Price(W)-Cost(W))/Price(W) 　

35%= (2.83-Cost(W))/2.83 　

Cost(W)= 1.84

Distributor Cost 　

Note: Price of Distributor= Cost of Wholesaler 　

Mark-up= (Price(D)-Cost(D))/Cost(D) 　

400%= (1.84-Cost(D))/Cost(D) 　

Cost(D)= 0.37

Biovail Cost

Price of Biovail= Cost of Distributor 　

Price(B)=Cost(D)= 0.37

With costs established, next compute how many tablets are worth $10 million.

Quantity(Tablets)= Revenue/Price(B)= 10,000,000/0.37 　

Quantity(T)= 27,181,299.27

Third, compute the capacity of the 18-wheeler.

Volume(T) in cm= 0.5 + 1 1.50

Volume(Truck)= Length*Height*Width= 1700cm*450cm*250cm 191,250,000.00

Volume(Drum)= 64gal*3.7854liters*1000cm^3 242,265.60

Drums/Truck= 191,250,000.00/242,265.60 789

Tablets/Drum= 242,265.60/1.5 161,510

Tablets/Truck= 161,510*789 127,431,390.00

And lastly, compute the number of 18-wheeler trackers that hold $10 million worth of tablets.

Quantity(Truckloads)= Quantity(T)/Tablets/Truck

= 27,181,299.27/127,431,390 　

Quantity(Truckloads)= 21.33%

2. Revenue recognition accounting procedures differ under the conditions of FOB shipping point and FOB destination. In the case of FOB shipping point, the service is rendered when freight leaves Biovail’s warehouse, therefore revenue accrues. Please note this assumes the four conditions stated by SAB 101 hold. The journal entries representing this transaction are a debit to Accounts Receivable offset by a credit to Revenue and a debit to Cost of Goods Sold (COGS) offset by a credit to Inventory. In the case of FOB destination, the service is rendered when freight arrives at the destination, usually the Distributor’s warehouse. Assuming the SAB 101 conditions are met, Biovail would accrue revenue with the same...