Consider the following additional information – R&D and selling expenses are substantially higher for Zderm because it is a new product. Jim has strongly supported development of the new product, including the high selling and R&D expenses. He has assured the Board of Directors that the Zderminvestment will pay off in improved profits for the firm. Discuss the ethical issues, if any, facing Jim as he reports to top management on the profitability of the firm’s two products. Jim Salters, the CO0 of CryoDerm, has asked his cost management team for a product-line profitabilityanalysis for his firm's two products, Zderm and Bderm. The two skin care products require a largeamount of research and development and advertising. After receiving the following statement fromCryoDerm's costing team, Jim concludes that Zderm is the more profitable product and that perhapscost-cutting measures should be applied to Bderm.Total$5,000,000($1,900,000) ($1,600,000) ($3,500,000)$1,500,000(900,000)(100,000)$ 500,000Bderm$2,000,000ZdermSales$3,000,000Cost of Goods SoldGross Profit$1,100,000$ 400,000R&DSelling expensesProfit before taxes

Mr.J has a good approach towards the New Product Development of Z Ltd. Its income statement shows…

Answered: Consider the following additional…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

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Consider the following additional information – R&D and selling expenses are substantially higher for Zderm because it is a new product. Jim has strongly supported development of the new product, including the high selling and R&D expenses. He has assured the Board of Directors that the Zderm
investment will pay off in improved profits for the firm. Discuss the ethical issues, if any, facing Jim as he reports to top management on the profitability of the firm’s two products.

Jim Salters, the CO0 of CryoDerm, has asked his cost management team for a product-line profitability
analysis for his firm's two products, Zderm and Bderm. The two skin care products require a large
amount of research and development and advertising. After receiving the following statement from
CryoDerm's costing team, Jim concludes that Zderm is the more profitable product and that perhaps
cost-cutting measures should be applied to Bderm.
Total
$5,000,000
($1,900,000) ($1,600,000) ($3,500,000)
$1,500,000
(900,000)
(100,000)
$ 500,000
Bderm
$2,000,000
Zderm
Sales
$3,000,000
Cost of Goods Sold
Gross Profit
$1,100,000
$ 400,000
R&D
Selling expenses
Profit before taxes

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