Lorex Pharmeceuticals

Overview After reviewing your request, Cougar Consulting performed an compend to assist Lorex Pharmaceuticals in determining a hindquarters direct appreciate for Linatol. The take aim take that we selected is intended to maximize expect component part during the manufacturing appendage and was ground on teaching contained in a report abandoned to Cougar Consulting. The analysis that we performed is described in further detail. Current slur Even though the automatic get hold ofing utensil utilise for doing can be circumscribe to a peculiar(prenominal) invest fill, the info we obtained about Linatol suggested inconsistencies in the fill amount during operations.Since revenues and specific variable constitute of Linatol are directly moved(p) by fill amounts and ploughshare is the battle of these be subtracted from revenue, ultimately, contribution is affected by the inconsistent fill amounts. once we establish how these revenues and greets are affected by the fill amounts, we remove to go over how the filling mechanism will function when groom at a specific position fill. These understandings will give us the information required to figure a stain fill that maximizes contribution for Linatol.Revenue in the lead we established a method to crack how the filling mechanism functioned at a specific bottom fill, we had to consider how the sign fill affected the revenues and the variable costs when calculative contribution. Starting with revenue, we learned from the report that the nursing bottles alter at or above 10 ounces would sell on the commercialized market for $186 per illustration. On the other hand, bottles modify infra the advertised 10 ounces would be sold for government use at $148. 80 per incase and are referred to as seconds. From this information, we created a formula ( look-alike 1) that channelized the revenue per case as a weighted average. The relationship between revenue and target fill is shown represen tically in adhesion 1 persona 1 Revenue = (% commercial) $186/case + (% seconds) $148. 80/case Costs As antecedently mentioned, calculating contribution for Linatol consists of subtracting specific variable costs from revenue. The variable costs related to target fill were found in the Projected direct Profit exhibit provided to Cougar Consulting.The first cost we determined for calculating contribution was the blending direct labor and active ingredients. To use this cost in calculating contribution, we divided the sum of these two costs by the total batch volume. The rounded cost of this counting equaled $0. 4027 per ounce, and its positive bilinear relation to the fill amount is graphically shown in Attachment 2. In other words, the cost increases per building block as the fill amount increases per unit.Another cost needed to calculate expected contribution consisted of an additional cost associated from the matter of seconds produced by the automatic filling mechanism. Th is additional cost is a ensue from the special encase required by seconds and is figured from dividing the labor ramble by the number of cases the laborer can package in an hour. This cost equals $0. 7083 per case and diminishes as the fill amounts increase because a higher target fill results in less seconds produced. This relationship is shown as a graph in Attachment 3.Since the cost associated for all cases is calculated in ounces, this unit was changed to cases by multiplying the cost by 12 bottles per case and a target fill amount in ounces per bottle. The additional cost per case from packaging seconds was figured by multiplying this cost by the luck of seconds created from the filling machine. This calculation will create an additional cost per case based on the number of seconds produced. The formula in introduce 2 was used to calculate costs. Figure 2 Costs = (12 bottles/case*target fill (oz)/bottle*$0. 027/oz) + (% of seconds) $0. 70833/case Statistical Survey Before we could determine a target fill to use for calculating maximum expected contribution, we needed to determine the probability of seconds produced by the automatic filling machine at contrary target fills. The best method we had to determine this probability came from the sample results provided in the consumeing-Line Test performed by Lorex. These test results were found in Exhibit 2 from the provided report and allowed us to determine the probability of seconds produced at any target fill.Assuming these samples were chosen truly at random and each sample was case-by-case from one another, the sample data was analyzed and found to be actually evenly distributed meaning the fill amounts precisely varied above and below the mean and median of the data set. In fact, the sample fill amounts were so evenly distributed that we could use a statistical method to determine the probability of seconds produce by the mechanism set at a specific target fill amount. For example, with a target fill amount set at 10. 2 ounces, the method used figures that 10. 6% of the bottles will be filled less than 10 ounces, and the rest will be filled at volume suitable for commercial retail. Based on this statistical method, we created a graph (Attachment 4) to show the probability of seconds produced as the target fill amount increased. Calculating Contribution Since we found a method to determine the probability of seconds that will be produced based on the target fill amount, we can determine a target fill that maximizes expected contribution per case because we have formulas for revenue and costs based on the expected production of seconds.The completed formula is shown below as Figure 3. Figure 3 Contribution = (% commercial) $186/case + (% seconds) $148. 80/case (12 bottles/case*target fill (oz)/bottle*$0. 4027/oz) + (% of seconds) $0. 70833/case Results The contribution formula in Figure 3 was used to determine the target fill that maximized contribution based on the probabi lity of seconds produced. A chart was created below as Figure 4 using the formula to figure contribution at antithetical target fills.The target fill that created the highest contribution value per case is the target fill the mechanism should be set at to maximize contribution. Attachment 5 shows the relationship between contribution per case and the target fill graphically. The graph and chart both demonstrates that the target fill should be set at 10. 4 ounces to maximize contribution. Figure 4 Target Fill (oz)Probability of Seconds Probability of CommercialContribution Per Case 912. 0523E-10$104. 60 9. 10. 999999999. 2754E-09$104. 12 9. 20. 999999712. 8665E-07$103. 63 9. 30. 999993936. 0716E-06$103. 5 9. 40. 999911588. 8417E-05$102. 67 9. 50. 999110970. 00088903$102. 22 9. 60. 993790330. 00620967$101. 93 9. 70. 969603640. 03039636$102. 37 9. 80. 894350230. 10564977$104. 74 9. 90. 734014470. 26598553$110. 33 100. 50. 5$118. 72 10. 10. 265985530. 73401447$127. 11 10. 20. 105649770 . 89435023$132. 70 10. 30. 030396360. 96960364$135. 07 10. 40. 006209670. 99379033$135. 51 10. 50. 000889030. 99911097$135. 22 10. 68. 8417E-050. 99991158$134. 77 10. 76. 0716E-060. 99999393$134. 29 10. 82. 8665E-070. 99999971$133. 81 10. 99. 2754E-090. 99999999$133. 33 112. 0523E-101$132. 84Closing The results of this analysis were based on the data results from the Filling-Line Test and just now apply if the filling mechanism performs consistent with these results. To ensure the filling mechanism is performing consistently with the data used for this analysis, we recommend that Lorex performs a normal Filling-Line Test. If the data from a more recent test varies from the data used in this analysis, we also recommend that Lorex requests another analysis to be performed by Cougar Consulting to determine a new target fill that maximizes contribution for Linatol.