Fact Pattern 19-2 Jayme's Best Produced a New Line of Pasta Sauce (Herbal

question 90

Multiple Choice

Fact Pattern 19-2
Jayme's Best produced a new line of pasta sauce (Herbal Health) , intending for it to have extra nutritional benefits. Using the freshest ingredients, Jayme's added special herbs to the tomato paste and spices, as the herbs are believed by some Tibetan monks to have the power to prevent cancer. Jayme's marketed the sauce in grocery stores and health food stores. Jayme's advertisements said that Herbal Health may help prevent cancer and taste a lot better than the competition. Based on these facts, answer the following questions.
-Refer to Fact Pattern 19-2. If the herbs put in Jayme's sauce are determined to be a drug that should be regulated, then before the sauce can be sold, the FDA will have to be sure that the herbs, which are supposed to stop cancer, are:

• A) safe for human consumption
• B) effective at preventing cancer
• C) something that should be sold over the counter or by prescription only
• D) safe for human consumption and something that should be sold over the counter or by prescription only
• E) safe for human consumption and something that should be sold over the counter or by prescription only and effective at preventing cancer

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Definitions:

Fixed Expenses

Costs that do not change with the level of production or sales over a certain period, such as rent or salaries.

Variable Costing

An approach in accounting that takes into account only the variable aspects of production costs (such as direct materials, direct labor, and variable manufacturing overhead) in the computation of product prices.

Net Operating Income

Net Operating Income is a measure of a company's profitability from its regular business operations, excluding income and expenses from interest, taxes, and other non-operational activities.

Fixed Manufacturing Overhead

Regular, constant expenses related to the production process that are not affected by the level of goods produced, such as rent and salaries of management.