0.028 Truckloads are required. This is derived from $10,000,000/$2.83 price per tablet, giving approximately 3,533,569 tablets. The dimensions of the truckload include 17mx4.5mx2.5m= 191.25m^3, or 191,250,000 cm^3. The volume each tablet takes up is 1.5cm^3, so a truckload can fit 191,250,000cm^3/1.5cm^3=127,500,000. 3,533,569/127,500,000=.028 truckloads.
2. How should the company recognize revenue based upon the two possible FOB contract structures mentioned in the case? Why?
If the shipping terms are FOB Shipping Point, the company recognizes revenue for the products shipped as soon as the products ship to the customer. This is because, per the contract, the title of the product shifts to the customer at shipping point, and the work necessary has been completed by the seller.
If the shipping terms are FOB Destination, the company does not recognize revenue until the products shipped arrive at the customer site. This is because, per the contract, the title of the product does not shift to the customer until it is at the customer site in their ownership. The revenue cannot be recognized until delivery has occurred.
3. How does the accident affect the stated revenues under the different FOB contract structures? Explain your reasoning.
If terms are FOB Shipping point, the accident does not affect the revenues for Biovail. The title of goods shifted to the distributor at the point of shipment, so Biovail has completed the required work per the contract, and can recognize revenue. This is assuming that the agreed upon amount was shipped, which can be proven by a packing slip or any other shipping documentation. In a circumstance like this, Biovail will likely undergo an audit with extreme scrutiny to ensure all terms of the contract were fully carried out. However, if Mr. Crombie (Biovail CFO) was mistaken and the contract with