Exercise 1-12B Upstream and downstream costs During 2007 Moseley Pharmaceuti

Exercise 1-12B Upstream and downstream costs

During 2007 Moseley Pharmaceutical Company incurred $10000000 of research and development (R&D) costs to develop a new hay fever drug called
Allergone. In accordance with FASB standards the entire R&D cost was recognized as expense in 2007. Manufacturing costs (direct materials direct
labor and overhead) to produce Allergone are expected to be $40 per unit. Packaging shipping and sales commissions are expected to be $5 per unit.
Moseley expects to sell 1000000 units of Allergone before developing a new drug to replace it in the market. During 2007 Moseley produced 160000 units
of Allergone and sold 100000 of them.

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