Cost anaiysis, litigation risk, ethics. Sam Nash is the head of new
product development
of Forever Young (FY). Nash is currently considering Enhance, which would
be FY's next major
product in its beauty/cosmetics line. Enhance represents a new direction
for FY. All FY's
current products are cosmetics applied to the skin by the consumer. In
contrast, Enhance is
inserred via a needle into the skin by a doctor's nurse after an initial
meeting with a doctor.
Each treatment is planned to cost patients $300 and will last three
months.
Enhance is an animal-based product that fills out the skin so that fewer
wrinkles are observable.
FY plans to sell Enhance to doctors for $120 a treatment, providing
the doctor with a
large incentive to promote the product. Nash, however, questions the
economics the economics of this
product. At present, the costs recognized are research and development,
manufacturing by a
third party, marketin, distribution, and a small amount (less than $1
million) for customer
support. Nash's main concern is with recognizing in the current costion
proposal potential
future litigation costs (such as the costs of lawyers and expert witnesses
in defending lawsuits
related to Enhance). He points to the litgation with breast implants and
notes that a settlement
of over $4 billion is being discussed in the press. He also notes the
tobacco company
litigation and hose proposed billion doller settlements. Elisabeth Savage,
the CEO and
president of the company, totally disagrees with Nash. She maintains she
has total confidence
in her medical research team and directs Nash not to include any dollar
amount for
potential litigation cost in his upcoming presentation to the board of
directors on the
ecolong background in finance. His current job represents his first
nonfinance position, and he
views himself as potential CEO material.
Required
1.What reasons might Savage have for not wanting Nash to record
potential future litigation
costs on the product in a presentation on Enhance's economics and
pricing？
2.Suppose Savage asks Nash to give her an "off-the-record"presentation
on the possible
magnitude of the potential litigation costs of Enhance. What
information should Nash
use to develop such a presentation and to estimate such costs？
3.After hearing Nash's presentation (see requirement 2), Savage directs
Nash to drop
any further discussion of the litigation issue. He is to focus on
making Enhance the
blockbuster product that field research has suggested it will be. Nash
is uneasy with
this directive. He tells Savage it is an"ostrich approach"
(head-in-the-sand) to a real
problem that could potentially bankrupt the company. Savage tells Nash
to go and
think about her directive.What should Nash do next？
幫幫我八.....我都快風ㄌ......我不想被蕩....
誰能告訴我題目在講啥呀.......謝謝各位好心ㄉ大爺
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