Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 2, Problem 36PCDEC
High drug costs are often in the news. Consumer groups contend that the pricing for some drugs (e.g., HIV anti-retrovirals, Betaseron for multiple sclerosis) is “too high” considering that the cost to manufacture each dose is so low. They talk of price gouging and excessive profits. Pharmaceutical companies defend the prices charged on the basis of research and development costs. They state that the percentage of successful drugs emanating from research efforts is low and that it may take years before a promising drug passes through Food and Drug Administration (FDA) requirements and becomes available for sale.
Required:
- 1. Which cost definition from Exhibit 2.5 is being used by the consumer groups? The pharmaceutical companies? What is included in the cost figures cited by consumer groups? What are the pharmaceutical companies including in their discussion of product cost? Which costs do you think should be included when comparing the cost of a drug with its price?
- 2. Suppose that you are the accountant for the pharmaceutical company who is charged with the responsibility for compiling costs associated with your newest drug. The cost figures will be used in pricing and to determine profitability of the drug. What costs do you think you would include? Does the IMA Statement of Ethical Professional Practice have any bearing on your choice? Discuss.
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Chapter 2 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 2 - What is an accounting information system?Ch. 2 - What is the difference between a financial...Ch. 2 - What are the objectives of a cost management...Ch. 2 - Define and explain the two major subsystems of the...Ch. 2 - What is a cost object? Give some examples.Ch. 2 - Prob. 6DQCh. 2 - What is a direct cost? An indirect cost?Ch. 2 - Prob. 8DQCh. 2 - What is allocation?Ch. 2 - Explain how driver tracing works.
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