NEWQ2. Mark Johnson is controller for a Pharmaceutical company. During thecompany's midyear review, Johnson notes that the company's R&Dexpenditures are already $3.0 billion, nearly 40% above the midyeartarget. In a meeting with the CFO later that day, Johnsons delivers thebad news to the CFO, Pauline Stewart. Stewart was shocked andoutraged that the R&D spending had gotten out of control. Stewart wasn'tany more understanding when Johnson revealed that the excess costwas entirely related to research and development of a new drug, Lucexx,which was expected to go to market next year. The new drug wouldresult in large profits for the company, if the product could be approvedby year-end. Johnson came up with the following ideas for making thethird-quarter budgeted targets:Sell off rights to the drug, Martek. Thecompany had not planned on doing this because, under current marketconditions, it would get less than fair value. It would, however, result in aonetime revenue that could offset the budget shortfall. The patent onMartek is about to expire, after which any competitor can make the drug.On balance, the results on the company of this action are:A.An overall positive effect on short-term profits, while not affecting expected long-term profitsB.An overall negative effect on short-term profits, while not affecting expected long-term profitsOC.An overall positive effect on short-term profits, while diminishing expected long-term profitsD.No predictable effect on short-term profits

Sell off rights to the drug, Martek - would raise the one time revenue that could offset the budget…

NEW Q2. Mark Johnson is controller for a Pharmaceutical company. During the company's midyear review, Johnson notes that the company's R&D expenditures are already $3.0 billion, ņearly 40% above the midyear target. In a meeting with the CFO later that day, Johnsons delivers the bad news to the CFO, Pauline Stewart. Stewart was shocked and outraged that the R&D spending had gotten out of control. Stewart wasn't any more understanding when Johnson revealed that the excess cost was entirely related to research and development of a new drug, Lucexx, which was expected to go to market next year. The new drug would result in large profits for the company, if the product could be approved

NEW Q2. Mark Johnson is controller for a Pharmaceutical company. During the company's midyear review, Johnson notes that the company's R&D expenditures are already $3.0 billion, ņearly 40% above the midyear target. In a meeting with the CFO later that day, Johnsons delivers the bad news to the CFO, Pauline Stewart. Stewart was shocked and outraged that the R&D spending had gotten out of control. Stewart wasn't any more understanding when Johnson revealed that the excess cost was entirely related to research and development of a new drug, Lucexx, which was expected to go to market next year. The new drug would result in large profits for the company, if the product could be approved

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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