Use the Information for the Question(s)below

question 13

Multiple Choice

Use the information for the question(s) below.
Big Cure and Little Cure are both pharmaceutical companies.Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval.If approved,Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure.Little Cure has 10 separate less important drugs before the FDA waiting for approval.If approved,each of Little Cure's drugs would produce $100 million in net income for Little Cure.The probability of the FDA approving a drug is 50%.
-What is the expected payoff for Little Cure's ten drugs?

• A)$500 million
• B)$100 million
• C)$1 billion
• D)$0

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Definitions:

Physical Flow

The tracking of physical units as they move through the production process.

Specific Identification

A method in inventory accounting that tracks the actual cost of specific items sold and in inventory.

Net Income Manipulation

The practice of altering financial statements to present a more favorable picture of a company's profits.

Average Cost Formula

A method used to calculate the cost of goods sold and ending inventory by taking the total cost of goods available for sale and dividing it by the total number of units available for sale.