Consolidated Drugs, Inc. has invested $4 million testing and developing the new anti-aging drug. Management now estimates which it will cost $2 million to manufacture and market this new product. The present value of total revenue from all prospect sales of this drug is estimated to be $5 million. On the basis of such numbers, management is recommending dropping project since costs will exceed revenues.
a.) Do you agree with this suggestion? Describe.
b.) The head of accounting department points out that if the product is produced and marketed, $4 million of the corporate overhead expenditures will be assigned to product. Does this new information modify your answer to (a) Describe?