1. How many truckloads of product are actually required to carry $10 million of product? Show your calculations.

Given:

a. 1 Wellbutrin XL tablet is estimated to be 1.5 cm3 (this includes the packing space)

b. 1 18-wheeler trailer’s dimensions are: 17m x 4.5m x 2.5m

Since the tablet and the trailer are using different units of measurements we need to convert the trailer dimensions to centimeters before we can calculate the volumes.

a. To convert meters into centimeters the ratio is: 1meter = 100 centimeters

17m= 1,700 centimeters

4.5m = 450 centimeters

2.5m = 250 centimeters

To calculate volume

b. Volume of a rectangular prism = a x b x c

Volume= 1,700 x 450 x 250

Volume = 191,250,000 cm3

c. To find out how many Wellbutrin XL tablets fit into a trailer

1.5x=191,250,000

X=127,500,000

d. How much revenue does Biovail get from a single pill

? 400% 35% $2.83

Biovail → Distributor → Wholesaler → Retailer

0.52 ← 2.10 / 400% ← 2.83/1.35%=2.10

127,500,000 x 0.52= $6,630,000

One truck can definately carry $10 million worth of Wellbutrin XL tablet product.

2. How should the company recognize revenue based upon the two possible FOB contract structures mentioned in the case? Since Biovail’s stock is publically owned it needs to file its financial statements with the SEC. The SEC requires that it abide by GAAP. GAAP requires that revenue be recognized when it is earned or realized. Meaning that the company has done everything it is supposed to do; which would include shipment. So Biovail should recognize revenue once its products have reached the Distributor’s FOB.

3. How does the accident affect the stated revenues under different FOB contract structures? Explain your reasoning? If Biovail recognizes revenues when the product leaves Biovail’s FOB shipping point then it is recognizing revenue before it has been earned and realized. Thus abusing accounting accruals and overstating