Pharmacare laboratories (Pvt) Ltd. Mahira IftikharM Tanzeel MohsinNida Zahid ButtTaimour FakharUsman Omer

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IntroductionPakistan Pharmaceutical Industry meets around 70% of the country's Demand.Growth during the last few decades.Drug Regulatory Authority of Pakistan. Most regulated industry in Pakistan.

Pharmacare Laboratories One of the leading Pharmaceutical Companies of Pakistan.Manufacturing pharmaceutical drugs since 1985.Mr. Babar Mehmood Chaudhry, CEO of Pharmacare worked for over a decade in pharmaceutical industry in Spain.Set up Pharmacare along with his 4 brothers.

Pharmacare Laboratories Manufactured Drugs comply with the international required standards: United States Pharmacopeia standard,British Pharmacopoeia standard.The company follows:Good Manufacturing Practices (GMP),Current good manufacturing practices (CGMP),ISO 9002 certified.

Product PortfolioPortfolio of over 100 products.4 broad categories:Suspension, Capsule, Tablets, and Injections.7 Therapeutic classes:Antianxiety, Analgesic, Antiulcer, Hypolipidemic, Atiatheroma, Antiplatelet, and Hematinic

Vision and Mission Vision StatementWe aspire to be recognized globally as reliable, trusted and most valued healthcare company.Mission StatementTo walk through the path of new technology, pursuing scientific Knowledge, continuous Research and Development, innovation and quality assurance discover, develop and deliver innovative, cost effective and quality medicines that help patients to prevail over serious diseases. Thus ensure benefit to the society at large.

Production flow chart

Job order CostingPharmacare is currently using job order costing.Compute the cost associated to each product for setting up price.Calculation of total cost of Pharfen:15% factory overhead rate to prime.5% wastage of actual raw material.3% wastage of actual packaging material

NAME OF MATERIAL 120,000 Packs Cost Ibuprofen PKR 18,000,000 Starch PKR 435,600 Sodium L.Sulphate PKR 38,400 Mag. Stearate PKR 32,400 Methyl Paraben PKR 24,000 Propyl Paraben PKR 3,600 Sugar coating Material cost PKR 780,000 Sugar coated Tablets Labour& printing cost PKR 480,000 Total PKR 19,794,000 Waste5% PKR 989,700 PKR 20,783,700 Packaging MaterialPlastic Jar PKR 1,080,000 Polythene bag PKR 30,000 Label, Glue, Etc. PKR 36,000 Corrugated Box PKR 84,000 Sub - Total PKR 1,230,000 Waste3% PKR 36,900 Total PKR 1,266,900

Direct Labor (Packaging) PKR 480,000 Direct Labor (Production) PKR 360,000 Prime Cost PKR 22,890,600 Indirect CostFOH15% PKR 3,433,590 Administration5% PKR 1,144,530 Miscellaneous10% PKR 2,289,060 Sales Promotion Cost5% PKR 1,144,530 Cost of Sales5% PKR 1,144,530 Distribution Cost10% PKR 2,289,060 Total Cost PKR 34,335,900.00

MFCA 2014

Analysis

Wastage5% Wastage at Production3% Wastage at Packaging

Factory Overhead15% of Prime Cost70% production30% packing

Comparison between MFCA and Pharmacare costing method (2014)Material costs often represent a large part of costs in industrial enterprises.Material efficiency.The essential point of MFCA is to recognize waste as non-marketable (second) products.In MFCA, waste is considered as a negative product

Comparison between MFCA and Pharmacare costing method (2014)Waste cost of direct material only.Labor and factory overheads are not utilized at fullChit chatting & BreaksMFCA divides output into negative and positiveEnergy is never 100% converted

Comparison between MFCA and Pharmacare costing method (2014)Positive product total cost for 2014 comes out to be PKR 25,035,352.Negative total cost comes out to be PKR 1,288,838 .4.90% of total cost.Percentage has remained consistent for 3 yearsTraditional costing approach - total waste is 2.99%Waste (Raw Material) + Waste (Packaging) 989,700 + 36,900 = PKR 1,026,6001,026,600/34,335,900 = 2.99%

Comparison between MFCA and Pharmacare costing method (2014)Traditional costing approach - Total cost of a product is PKR 34,335,900 (NOT CGS)According to MFCA Cost of goods manufactured is PKR 26,324,190Administrative, Miscellaneous, Sales promotion, Distribution costs and Cost of sales

ConclusionCompany needs to incorporate the wastage of labor and factory overhead as well to better state the costCompany needs to exclude the costs of administrative, miscellaneous, sales promotion, distribution costs and cost of sales while calculating the total costCompany has no waste management department that manages waster and no information was provided to where do the waste of raw material and packaging material goesRandom percentages of factory overheads to both processing stages

RecommendationsMFCA offers insights to company material flows and provides guidelines for improvements.Increase production efficiency through capital investment, based on appropriate and accurate evaluation of investment projects (Latest technological equipment).Reduce their costs through changes in product design and raw materials based on precise evaluation of manufacturing cost.Employees can be reinforced for lower labor wastage by revitalizing on-site improvement activities (e.g. environmental and quality management systems) by providing specific targets to them.

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