22nd May 2011
Merck limited is a company producing drugs that treat chronic pain in sufferers of diseases such as arthritis. Vioxx, One of the drugs produced and sold by the company has caused serious problems for the company due its strong chemical component and therefore the company is forced to replace the drug in the market following a law suit against it by one of its customers.
The financial overview of the company is discussed below.
The company has budgeted for $ 3,496,649 per year to be incurred in the implementation of the drug. This is slightly higher than the actual expenditures of the previous fiscal year, beginning July2009 to July 2010, the estimated budget provided for $3,053,442. These were estimates as per the Betaofflab analgesic department estimates for both the years. This means that the new drug will call for additional expenditures than the previous year.
However, going by the sum of the actual expenditures incurred in the first quarter of the year 2011, and then the actual budget will again be below the estimated budget. The quarter’s total expenditure is $995,124, and going by this average for the next other three quarters, the total expenditure exceeds the estimated provisions.
It is also evident that in both the fiscal years, the estimated budgets have been below the actual expenditures. This is because the firms estimated budget assumes constant costs when preparing the budgets. For example, in the 2011 budget, looki8ng at the expenses, specifically on power, the cost per week is $ 1168, then it follows that month expenditure on power = 4*1168 =4,672. In real life, costs are not assumed to be constant. They are subject to price variations.
