Question

Demand for a drug called Avonex has declined every year for thepast 10. Not a problem for its manufacturer, Biogen. U.S. revenuefrom the drug has more than doubled in that time, to $2 billionlast year. The key: repeated price increases. It is an example ofdrug companies' unusual ability to boost prices beyond theinflation rate to drive their revenue, even when demand for thedrugs doesn't cooperate. How could the manufacturers usecost-volume-profit analysis to improve profitability? In what waysmight they have used the analysis tool to make decisions in thepast? If Biogen raises prices in the face of decreased demand, howare the company's fixed costs impacted? What is the affect onvariable costs? How do those factors ultimately affect netincome?