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Business Description
The ABC Pharmaceuticals is a healthcare company dedicated to the manufacturing of quality pharmaceutical products. We will accomplish this by using high quality manufacturing and research, a creative marketing program, and a comprehensive distribution network using both national and international distribution network, internet presence, and a consumer catalogue. The Product that the company will offer will be based on research of Japanese Pharmaceuticals giant Takeda, with Head Office Located at XXX, XXX Building Dubai. The office is approximately 400 square feet. An additional 800 square feet of office space can be made available within the building. Keeping in view the desirable space needed for plant, accessibility and demographic shifts the Manufacturing plant will be located at Abu Dhabi, UAE. The Business will be organized at international level with sales office located at XXX, Liverpool, UK, and xxxx, Tokyo Japan. By utilizing this multi-channel approach we will be able to reach the niche market for quality personal health products rapidly and efficiently. The ABC Pharmaceuticals is organized as a Sole proprietorship Business, and it is 100% owned by M/S XYZ. The Total Capital of the Organization will be provided by M/S XYZ and he will not full share the Profit and losses of the organization with anyone.
1.2.1. Products Offered: ABC Pharmaceuticals will offer different types of product to the market, which includes. o o Mefanemic Acid Diclofenac Sodium
The company will launch different brand in other categories including Cardiovascular, Hypertension, Antibiotic, etc in the Future.
1.2.2.
The Industry
ABC Pharmaceuticals will occupy a unique market position. No other brand offers a specialty line that includes analgesic, antibiotic and antihistamine. However, within
each category significant brands do exist. Quality and price vary widely within each group. ABC Pharmaceuticals will be positioned as a quality brand. The Pharmaceutical market has seen large annual growth rates over the past decade. Last year alone, the market grew by 37%. Clear divisions between traditional categories are becoming blurred and new lines are also emerging, creating new openings for profit. In pharmaceutical fitness apparel and accessories there is a tremendous opportunity since the antibiotic, antihistamine and analgesic segments have been grossly overlooked. ABC Pharmaceuticals is the only company that will develop a line of analgesic, antibiotic and antihistamine that will be distributed in UAE, UK, and Japan. Early sales for the brands will be generated in UAE and then the Company will pursue the Market Development strategy by exporting Products to UK and Japan.
It should be noted that the hierarchy will be the same for all the department. For the Sake of space only one department have been elaborated.
Major Raw Material used in the production of Product 2 DICLOFENAC SODIUM 10 MG TABLETS 1. 2. 3. 4. 5. 6. Diclofenac Sodium Avicel pH 102 Lactose Magnesium Stearate Primogel Talcum Powder
The following raw Materials are needed to produce this product: 1. Mefanamic Acid 2. Lactose SD 3. Magnesium Stearate 4. Avicel pH 102 5. Aerosil 6. Iso Propyl alcohol 7. DI Water 8. Methylene 9. Chlorides 10.Castor Oils The first five of the above mentioned material are Direct Material while the last 4 mentioned (Iso Propyl alcohol, DI Water, Methylene, Chlorides, and Castor Oils) are indirect Material 2.1.2.Product 2 DICLOFENAC SODIUM 10 MG TABLETS The following raw Materials are needed to produce this product: 1. 2. 3. 4. 5. 6. 7. Diclofenac Sodium Avicel pH 102 Lactose Magnesium Stearate Primogel Talcum Powder Iso Propyl alcohol
2.1.3.
The first six of the above mentioned material are Direct Material while the last Five mentioned (Iso Propyl alcohol, DI Water, Methylene, Chlorides, and Castor Oils) are indirect Material. These raw Materials will be purchased from the following different sources.
Source of Material
Item
Mefanamic Acid Lactose SD Magnesium Stearate Avicel pH 102 Aerosil Diclofenac Sodium Primogel
Imported From
China China Germany China China India UK
2.1.4. Material Cost of Mefanemic Acid: For the sake of material cost standard component vendor quotes may be used as quoted by Thomas Register of American Manufacturers is used. According the cost of 500,000 Batch of Mefanemic Acid is as follow:
Item
Mefanamic Acid Lactose SD Magnesium Stearate Avicel pH 102 Aerosil
356700
1100
Hence the total Estimated Per Unit Cost will be: o Material Cost = 356700/50000 = 7.134 o Indirect material Cost (to be added to Manufacturing Overhead) 1100/50000 = 0.022 2.1.5. Material Cost on Diclofenac Sodium 10 mg
Item
Diclofenac Sodium Avicel pH 102 Lactose Magnesium Stearate Primogel
442800
1600
Hence the total Estimated Per Unit Cost will be: Material Cost = 442800/50000 = 8.856 Indirect material Cost (to be added to Manufacturing Overhead) 1600/50000 = 0.032
Of the above the last two are termed as Direct Labor, as its costs can be easily and conveniently traced to a product. On the other hand the First Four mentioned in the list is termed as Indict Labor, and will be charged to Production Overhead, as it cannot be easily and conveniently traced to a particular product. The Labor Cost Division on Monthly basis will be as follow:
Direct Labor ost Workers 20@1200 Coding Section Workers 3@1500 Total Direct Labor Cost Indirect Labor (Manufacturing Overhead)Cost: Quality Control Manager 1@5000 Asstt Manager 5@4000 QC Analyst 1@3000 FG Store Incharge 1@2000 Total Direct Labor Cost
= = =
= = = = =
The Organization planned to produced total 15 Batches of 5,00,000 tablets each. So the Direct Labor Cost Per Strip (1strip =10 Tablets) Direct Labor Cost Divided By No. Of Strip Produced during a Month o 28500/(15*50000) = 0.038 Per Strip
While the Indirect Labor Cost on Per Unit Basis will be: o 30000/(15*50000) = -0.040 Per Strip
All the payments to management and worker will be done on monthly basis. The employees of Foreign Sales Branches will be paid a straight commission of 15% of the Sales. ABC Pharmaceuticals own all these facilities. The list of these machines is as under. 1. ZP 33 Compression Machine (For Compression) 2. Digital Weighing Balances (300Kg, 120Kg, 100Kg, 50Kg, 10Kg) For Weighing. 3. Blistering Machines (Alu-Alu) For Blistering. 4. Liquid Filtering Machines- For liquid Filtering 5. Liquid Filling Machines- For liquid Filling 6. Blister Sorting Machines- For sorting rejected Blisters. 7. Capsule Filling Machines For Capsules Filling 8. Rotary, V Type and Ribbon Mixers For Powder Mixing. 9. Mixing Cones For Mixing 10.Driers (Fluid Bed, tray)- For drying of Powders.
2.3.
Manufacturing Overhead
The Organization will produced its products at the state of the art plant that will established at Abu Dhabi. The Organization will buy various assets that are needed to produce various products listed in 1.6 above. The Cost of the product for the
Organization is Depreciation Cost, Repair & Maintenance Cost. The Depreciation cost is calculated on straight Line method of Depreciation while for the sake of Repair and Maintenance cost the expenses are based on the estimates quoted by Thomas Register of American Manufacturers. The following Table portrays the Depreciation, Repair Maintenance Cost Per Month. Facility Depreciation Cost (Per Month AED) Repair & Maintenance Cost (Per Month AED) 1000 500 200
Building 2000 ZP 33 Compression Machine 1000 Blistering Machines (Alu-Alu) For 1200 Blistering Liquid Filtering Machines 800 150 Liquid Filling Machines 2000 200 Blister Sorting Machines 100 20 Capsule Filling Machines 2000 150 Rotary, V Type and Ribbon Mixers 1300 100 Mixing Cones 1000 40 Driers (Fluid Bed, tray) 1000 100 Total Cost 12400 2460 The Manufacturing Overhead Expenses will be spread uniformly on the number of batches produced by the Organization. If the Organization produce 15 Batches of 500,000 tablets the total Depreciation and Maintenance expenses on Per Unit Base will be: o 12400+2560/(15*50000) = 0.019813
The Total Manufacturing Overhead expenses are thus: Item Indirect Material Indirect Labor Other (Dep. Repair & maintenance) Per Unit 0.02200 0.04000 0.01981
0.08181
The Total Manufacturing Overhead Expenses for the Year will be: o o 15 Batches Per Month * 12 = 180 Per Annum. One Batch is composed of 500,000 Tablets (50000 Strips as One Strip contain 10 Tablets) Hence Total products produced will be: 180*50000 = 9,000,000. Total Manufacturing Overhead Per Annum = Per Unit Overhead Cost * Total Products produced per Annum =9,000,000 * 0.08181 = 736,317
The Company Plan to sell Mefanemic Acid at 35 per Strip. 30% of the Sales Price will cover the Sales & Marketing Expense(Including Sales & marketing Staff Salaries& Commission, and Promotion Expenses), while 7% of the Sales Price will cover the Admin Cost, and the Distribution Margin will be 25%. Thus the Income statement on Per Unit basis for Mefanemic Acid will be as follow: Sales Price = -Total Manufacturing Exp = Gross Margin Per Unit = -Admn Cost = -Sales & Marketing = -Distribution Expenses = Total Indirect Expenses = Earnings Before Taxes = 35.0000 (7.25381) 27.74619 2.45 10.50 8.75 (21.70) 6.04619
2.6.2.
Diclofenac Sodium Cost is as follow: Direct Material Cost Per Unit (AED) = Direct Labor Cost Per Unit (AED) = Manufacturing Overhead Cost per Unit (AED) = Total Manufacturing Cost will be (AED) = 8.8560 0.0380 0.0818 8.9758
The Company Plan to sell Diclofenac Sodium 10 mg at 37 per Strip. 30% of the Sales Price will cover the Sales & Marketing Expense, while 7% of the Sales Price will cover the Admin Cost, and the Distribution Margin will be 25%. Thus the Income statement on Per Unit basis for Mefanemic Acid will be as follow: Sales Price = -Total Manufacturing Exp = Gross Margin Per Unit = -Admn Cost = -Sales & Marketing = -Distribution Expenses = Total Indirect Expenses = Earnings Before Taxes = 37.0000 (8.9758) 28.0242 2.59 11.1 9.25 (22.94) 5.0842
Calculate the contribution margin for each of your two products.. Mefenamic Acid 315000000 260584290 54415710 Diclofenac Sodium 333000000 287242200 45757800
Calculate the breakeven volume and sales for each of your two products on an annualized basis. Sales = Variable expenses + Fixed expenses + Profits Mefenamic Acid Diclofenac Sodium 35Q=28.95381Q+736317 37Q=31.9851Q+736317 6.04619Q=736317 5.0842Q=736317 Q=121782 Q=144825 Decide for each product how many units you intend to sell in a year (first stage of setting a budget) Mefenamic Acid Diclofenac Sodium The organization must sell above 121782 strips for Mefanamic Acid and 144825 for Diclofenac Sodium to achieve a profit. Q=121782 Q=144825
Calculate the annualized breakeven sales mix volume and dollars for your company.
Mefanamic Acid Sales Var. exp. Contrib. margin Fixed exp. $ 315,000,000 100 % 83% 17% Diclofenac Sodium $ 333,000,000 100 % 86% 14% Total $ 648,000,0 00 547, 826,490 315, 015,000
260584290
$ 54,415,710
287242200
$ 45,757,800
736317
$ 314,278,6 83 48.6 $ 51.3 $ 100.0
mix
315,000,000
2%
333,000,000
8%
648,000,0 00