How Many Truckloads of Product Are Actually Required to Carry $10 Million of Product?

Q: How many truckloads of product are actually required to carry $10 million of product?

Number of Drums Per Truck load :

Volume of Semi-Trailer

Volume Drum Containers Occupy = Number of Drums Per Truck Load

Plug in known values :

Volume of Semi Trailer = 17m x 4.5m x 2.5m = 191250 L

Volume Drum Containers Occupy = 64 gallon x 4/π = 81.5 Gal = 308 L

Number of Drums Per Truck Load = 191250 / 308 ≈ 620 (Drums)

Inventory value of each Drum loaded with Wellbutrin® XL :

Volume of one Drum Container

Volume of Each Tablet with additional space = Number of Tablet per Drum

Wholesale Acquisition Price per tablet = Distributor markup x(1+ Wholesale Margin) x Inventory Value of each Tablet

Inventory Value of each loaded drum = Number of tablet x Inventory per tablet

Plug in known values:

Number of Tablet per Drum = 242266/1.5 = 161510 (Tablets)

Inventory Value of each Tablet = (2.83 / 1.35)/4 = 0.52 (Dollar)

Inventory Value of each loaded drum = 161510 x 0.52 = $84,643

Number of Truck loads for $10 Million worth of Inventory :

$ 10,000,000

Number of Truck Loads = 84,000 ( $ per drum )x 620(Drums) = 0.19 ≈ 1 (Truck Load)

A:

It would take 19% of 1 truck load to transport $10 Million worth of Product

2. How should the company recognize revenue based upon the two possible FOB contract structures mentioned in the case? Why?

Under GAAP requirements revenue is recognized when the following four criteria are met:

1). Persuasive evidence of an arrangement exist;

2). Delivery has occurred or services has been rendered;

3). The seller’s price to the buyer is fixed or