IJRIM

Volume 1, Issue 8 (December 2011)

(ISSN 2231-4334)

ANALYSIS OF VARIABLES RESULTING IN COST-SHEET VARIATION - (A case study of Pharmaceutical Company in Kala-Amb)
Bhawana Arora*

ABSTRACT
Each and Every company prepares their product manufacturing cost format. This format is known as cost-sheet of a particular product. It is very important for manufacturing concern. In this all the direct or indirect expenses which occurred during manufacturing of a particular product are recorded. Beside included expenses so many different points are also added in the cost sheet format. As a result company will determine per unit cost of a product. In this I have discussed that what factors, points, rules, methods, authority and format are used while prepared any kind of cost-sheet. I have taken the data of a particular company which includes all the raw-material detail, their cost, their rules for preparation. Cost-sheet is prepared by the account department in small concern, or in big concern it is prepared by Cost accountant, who got the degree from the ICWAI (Indian cost and works account of India). Rules and regulations are prepared by DRUG PRICE CONTROL ORDER in case of Pharmaceuticals Company. I have taken the sample of tablets

manufactured by the pharmaceutical company with different packing material. Different packing material creates a different cost for the same product. Thats why the price of same product in the market in different. The reason for using different packing material is to supply the product in urban, rural and metropolitan cities to attain the high profit from the customers. Those who want to start up their carrier as a entrepreneurship this paper is very fruitful for them. Keywords: Material, Cost, Expenses, DPCO, Batch size, Manufacturing Charges, Rawmaterial etc.

*Lecturer, Himalayan institute of management Kala-Amb

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IJRIM OBJECTIVES

Volume 1, Issue 8 (December 2011)

(ISSN 2231-4334)

To understand the D.P.C.O rules. To prepare the cost sheet as per format To analysis of different types of costs. To find out what are the factors which influence the cost-sheet. To find out the different types of expenses this accrued while preparing any product.

DRUG PRICE CONTROL ORDER

There are so many authorities for controlling drugs and their formulations; one of them is drug price control order. It is the national pharmaceutical pricing authority in India. Drug Price control order is established in 1995 Under Section 3 of the Essential Commodities Act, 1955 (10 of 1955), the Central Government. Its compulsory for pharma manufacturing company that they have to prepare their cost-sheet as per the D.P.C.O. OBJECTIVES:

Providing abundant quantity, at reasonable prices of essential and life saving and medicines of good quality.

To Strengthening the quality control system over drugs and medicines production and promoting the rational use of drugs in the country.

Creating an environment friendly to channelizing new investment into the pharmaceutical industry with an objective to boost

Cost-effective production with economic sizes and introducing new technologies and new drugs. Strengthening the indigenous capability for production of drugs. Following are the format which is adopted by a particular company according to D.P.C.O In this all the manufacturing and packing material is charged according to average weight of a packing material.

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Volume 1, Issue 8 (December 2011)

TABLETS SECTION

(ISSN 2231-4334)

CONVERSION & PACKING CHARGES AS PER D.P.C.O BATCH SIZE-100000

UNCOATED TABLET

S.N O 1 2 3 4 5 AVG.WT UP TO 100 MG 101 TO 350 MG 351 TO 600 MG 601 TO 900 MG 901 TO 1200 MG MFG CHARGES 793 1099 1931 2278 2711 PKG.CHARGES 1600 1600 1600 1600 1600

TOTA L 2393 2699 3531 3878 4311

BATCH SIZE-100000

COATED TABLET S.N O 1 2 3 4 5 AVG.WT UP TO 100 MG 101 TO 350 MG 351 TO 600 MG 601 TO 900 MG 901 TO 1200 MG MFG CHARGES 1188 1672 2470 3098 3942 PKG.CHARGES 1600 1600 1600 1600 1600 TOTA L 2788 3272 4070 4698 5542
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IJRIM

Volume 1, Issue 8 (December 2011)

(ISSN 2231-4334)

This is the basic format which is prepared by DRUG PRICE CONTROL ORDER. Its a standard format. Every company can charge their minimum cost according to this format. All these diagrammed shows the various types of packing material. In ACCURA CARE PHARMACEUTICL PVT.LTD. Three types of packing are used. Firstly Alu-Alu packing is more costly then others because base foil and printed foil both are from thick aluminium. Second type is stripped in this both sides printed foil is used. In stripped packing thin aluminium is used as compared to Alu-Alu. Thats why this packing is less costly then AluAlu packing. Last type is blister packing in this PVC and printed foil is used. PVC is less costly then aluminium foil. Thus blister packing is cheaper than other packing.

ALU ALU PACKING

STRIPPED PACKING

PVC PACKING

PVC BASE FOIL

CARTONS PVC STRIPING (PLASTIC)

ALU/ALU PACKING PACKING MATERIA L BASE FOIL

CASH LABEL

MAT

PRINTING FOIL C/BOX TAPE

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IJRIM

Volume 1, Issue 8 (December 2011)

(ISSN 2231-4334)

In tablet section the main difference between three costs sheet of a same product is about their packing material. In tablet section the first major effected part is about batch size. When the size of batch is small then the cost of per tablet is high, because in that case the manufacturing expenses are fixed by a company. While the cost of raw-material and packing material is less. But the manufacturing and the testing expenses are determined by a company. It has standard rate. Company has right to charged these expenses as per company norms. If any company charges less manufacturing and the testing charges then company may suffer for losses thus its necessary for a company to take standard batch size. In tablet section there is different types of packing size. When the size of packing is small then the cost of per product is low because small packing means small size of actual product. It describes the quantity of a product. When the size of tablet is large then the packing size of per tablet is also large. When packing size of per tablet is large then the packing size of per box is increased. When the size of per box is increased then the size of corrugated box is increased .at last the cost of packing material is increased.

100 MG 50 MG 300MG 150 MG 200MG 5 MG

400MG

This includes the product size that company produced. If the batch size is small and sale quantity of a product is high the costing of a product is high. In finance department the finance manager should know who that company produced what type of a product.

1.COST SHEET OF SAME PRODUCT WITH DIFFERENT PACKING MATERIAL

PROEFLOX-200 MG TABLET
BATCH SIZE SALE QUANTITY PACK SIZE PER BOX SAMPLE PACK SIZE RAW MATERIAL CHARGES OFLAXOCIN IP 400000 2000 200 RATE 2352.58 TABLET TABLET TABLET AMOUNT 190088.46

(10X2x10) QTY. 80.800 KG

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Volume 1, Issue 8 (December 2011)

28.000 11.000 25.833 0.150 0.050 2.500 3.000 0.667 0.500 0.333 5.000 0.333 3.600 40.000 0.333 54.000 66.000 (A) QTY. 60.00 12.80 2000 35 4 1 KG KG PC PC PC PC KG KG KG KG KG KG KG KG KG KG KG KG KG KG KG KG LTR.

(ISSN 2231-4334)
24.50 55.00 29.01 381.21 485.68 47.22 14.00 240.19 53.90 335.67 24.50 520.00 852.10 52.51 150.00 40.37 1.00 686.00 605.00 749.42 57.18 24.28 118.05 42.00 160.21 26.95 111.78 122.50 173.16 3067.56 2100.40 49.95 2179.98 66.00 200428.88 RATE 105.00 400.00 1.50 35.00 25.00 325.00 1600.00 AMOUNT 6300.00 5120.00 3000.00 1225.00 100.00 325.00 1600.00 17670.00 218098.88

STRACH I.P MICRO CRYDTALINE CELLULOSEE POW DI CALCIUM PHOSPHATE IP METHYL PARABIN SODIUM IP PROPYLE PARABEN SODIUM IP MAGESIUM STERARATE IP TALCUM POWER I.P CROSS CARMELLOSE SODIUM IP SODIUM STRACH GLYCOLLATE IP AEROSIL ( COLLIDAL SILICON DIOXIDE IP) STRACH I.P HPMC E-15 AF COAT WHITE NONAQUEOUS ISOPROPYL ALCOHOL IP COLOUR TITANUM DIOXIDE IP METHYLENE CHLORIDE IP PURIFIED WATER TOTAL RAW MATERIAL PACKING MATERIAL CHARGES BASE FOIL PRINTED FOIL CARTONS CORRUGATED BOX TAPE MATE PACKING CHARGES AS PER D.P.C.O TOTAL PACKING MATERIAL TOTAL AMOUNT (A+B) WASTAGE TOTAL AMOUNT (A+B+C) MFG CHARGES TOTAL AMOUNT (A+B+C+D) TESTING CHARGES TOTAL AMOUNT (A+B+C+D+E) MARGIN PER TABLET TOTAL AMOUNT (A+B+C+D+E+F) EXPIRY EXPENSES (G) (F) (E) (D) (B)

1 2 3 4 5 6 7

2%

4361.98 222460.86 9880.00 232340.86 1000.00 233340.86

20%

44492.17 277833.03

1%

2778.33

COST OF TOTAL BATCH COST OF PER TABLET COST OF PER BOX

(A+B+C+D+E+F+G)

280611.36 0.70 140

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Volume 1, Issue 8 (December 2011)

(ISSN 2231-4334)

********************************************************
2.COST SHEET OF SAME PRODUCT WITH DIFFERENT PACKING MATERIAL

PROEFLOX-200 MG TABLET
BATCH SIZE SALE QUANTITY PACK SIZE PER BOX SAMPLE PACK SIZE RAW MATERIAL CHARGES OFLAXOCIN IP STRACH I.P MICRO CRYDTALINE CELLULOSEE POW DI CALCIUM PHOSPHATE IP METHYL PARABIN SODIUM IP PROPYLE PARABEN SODIUM IP MAGESIUM STERARATE IP TALCUM POWER I.P CROSS CARMELLOSE SODIUM IP SODIUM STRACH GLYCOLLATE IP AEROSIL ( COLLIDAL SILICON DIOXIDE IP) STRACH I.P HPMC E-15 AF COAT WHITE NONAQUEOUS ISOPROPYL ALCOHOL IP COLOUR TITANUM DIOXIDE IP METHYLENE CHLORIDE IP PURIFIED WATER TOTAL RAW MATERIAL PACKING MATERIAL CHARGES ALU/ALU BASE FOIL ALU/ALU PRINTED FOIL CARTONS CORRUGATED BOX TAPE MATE PACKING CHARGES AS PER D.P.C.O TOTAL PACKING MATERIAL TOTAL AMOUNT (A+B) WASTAGE TOTAL AMOUNT (A+B+C) MFG CHARGES TOTAL AMOUNT (A+B+C+D) TESTING CHARGES TOTAL AMOUNT (A+B+C+D+E) (E) (D) 2% (B) (A) QTY. 80.00 21.60 2000 35 1 1 KG KG PC PC PC PC 400000 2000 200 RATE 2352.58 24.50 55.00 29.01 381.21 485.68 47.22 14.00 240.19 53.90 335.67 24.50 520.00 852.10 52.51 150.00 40.37 1.00 TABLET TABLET TABLET AMOUNT 190088.46 686.00 605.00 749.42 57.18 24.28 118.05 42.00 160.21 26.95 111.78 122.50 173.16 3067.56 2100.40 49.95 2179.98 66.00 200428.88 RATE 350.00 400.00 1.50 35.00 25.00 325.00 1600.00 AMOUNT 28000.00 8640.00 3000.00 1225.00 25.00 325.00 1600.00 42815.00 243243.88 4864.88 248108.76 9880.00 257988.76 1000.00 258988.76

(10X2x10) QTY. 80.800 28.000 11.000 25.833 0.150 0.050 2.500 3.000 0.667 0.500 0.333 5.000 0.333 3.600 40.000 0.333 54.000 66.000 322.099 KG KG KG KG KG KG KG KG KG KG KG KG KG KG KG KG KG LTR.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1 2 3 4 5 6 7

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Volume 1, Issue 8 (December 2011)

(F) 20%

(ISSN 2231-4334)
49621.75 308610.51

MARGIN PER TABLET TOTAL AMOUNT (A+B+C+D+E+F) EXPIRY EXPENSES COST OF TOTAL BATCH COST OF PER TABLET COST OF PER BOX

(G)

1%

3086.11 311696.61 0.78 156

(A+B+C+D+E+F+G)

******************************************************* **
3 3.COST SHEET OF SAME PRODUCT WITH DIFFERENT PACKING

PROEFLOX-200 MG TABLET
BATCH SIZE SALE QUANTITY PACK SIZE PER BOX SAMPLE PACK SIZE RAW MATERIAL CHARGES OFLAXOCIN IP STRACH I.P MICRO CRYDTALINE CELLULOSEE POW DI CALCIUM PHOSPHATE IP METHYL PARABIN SODIUM IP PROPYLE PARABEN SODIUM IP MAGESIUM STERARATE IP TALCUM POWER I.P CROSS CARMELLOSE SODIUM IP SODIUM STRACH GLYCOLLATE IP AEROSIL ( COLLIDAL SILICON DIOXIDE IP) STRACH I.P HPMC E-15 AF COAT WHITE NONAQUEOUS ISOPROPYL ALCOHOL IP COLOUR TITANUM DIOXIDE IP METHYLENE CHLORIDE IP PURIFIED WATER TOTAL RAW MATERIAL PACKING MATERIAL CHARGES PLAIN FOIL PRINTED FOIL CARTONS CORRUGATED BOX TAPE MATE PACKING CHARGES AS PER D.P.C.O TOTAL PACKING MATERIAL TOTAL AMOUNT (A+B) (B) (A) QTY. 40.00 40.00 2000 35 1 1 KG KG PC PC PC PC 400000 2000 200 RATE 2352.58 24.50 55.00 29.01 381.21 485.68 47.22 14.00 240.19 53.90 335.67 24.50 520.00 852.10 52.51 150.00 40.37 1.00 TABLET TABLET TABLET AMOUNT 190088.46 686.00 605.00 749.42 57.18 24.28 118.05 42.00 160.21 26.95 111.78 122.50 173.16 3067.56 2100.40 49.95 2179.98 66.00 200428.88 RATE 260.00 280.00 1.50 35.00 25.00 325.00 1600.00 AMOUNT 10400.00 11200.00 3000.00 1225.00 25.00 325.00 1600.00 27775.00 228203.88

(10X2x10) QTY. 80.800 28.000 11.000 25.833 0.150 0.050 2.500 3.000 0.667 0.500 0.333 5.000 0.333 3.600 40.000 0.333 54.000 66.000 322.099 KG KG KG KG KG KG KG KG KG KG KG KG KG KG KG KG KG LTR.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1 2 3 4 5 6 7

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Volume 1, Issue 8 (December 2011)

(ISSN 2231-4334)

WASTAGE TOTAL AMOUNT (A+B+C) MFG CHARGES TOTAL AMOUNT (A+B+C+D) TESTING CHARGES TOTAL AMOUNT (A+B+C+D+E) MARGIN PER TABLET TOTAL AMOUNT (A+B+C+D+E+F) EXPIRY EXPENSES

2%

4564.08 232767.96

(D)

9880.00 242647.96

(E)

1000.00 243647.96

(F)

20%

46553.59 290201.55

(G)

1%

4000.00

COST OF TOTAL BATCH COST OF PER TABLET COST OF PER BOX

(A+B+C+D+E+F+G)

294201.55 0.74 147

CONCLUSION
TABLETS SECTIONS
45000 40000 35000 30000 25000 20000 15000 10000 5000 0 BLISTER ALU/ALU STRIPTED

TOTAL COST OF PACKING MATERIAL (B)

In this diagrammed we are comparing the data of previous describe cost-sheet. In this graphic we can analysis that if the quantity of a product is same and only the packing material is changed then there is a difference of cost of per product. By adopting differentdifferent packing material. The cost of per tablet is changed. Thus the cost of box is totally changed. In this the Alu/Alu packing is more costly. In this tablet section I have selected same size, same quantity of same product. In these costsheets everything is same but still there is a difference of outlook that is packing. In this only International Journal of Research in IT & Management http://www.mairec.org 23

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Volume 1, Issue 8 (December 2011)

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packing charges are different. Because every pharmacy company has some parameters they prepared their product as per customer demand and market situation. In these cost sheet the price of packing material is changed. The Alu/Alu packing is more costly as compared to other packing material. All the packing material are in the form of aluminium but still all the packing material is different from each other because of their printed size, their weight and their stuff. Alu/Alu packing is too much thicker than other packing material. When the size of packing is increased then the cost of other expenses are also increased. Thus at last the total cost of per batch is different. As a result of cost of per tablet or cost of per box is changed. Thus the costing of a product is depending upon various factors. It may be total cost of rawmaterial, or total cost of packing material.

SUGGESTIONS AND RECOMMENDATIONS

While preparing cost sheet the company should maintain a standard batch size. While taking any purchase or sale order standard batch size, their sale quantity of per product should be determined. Price of raw material should be up- to date. It may fluctuate time to time. Proper cash flow should be retaining in business. For correct costing of a product every company should followed a D.P.C.O (Drug Price Control Order) rules. Cost-sheet should be prepared in M.S- Excel. Always use formulas dont copy the amount. Taking tablets and capsules batches are more beneficial. Fixed cost should be decreased when the batch size is less. Control on wastage may reduce the cost of product.

BIBLOGRAPHY
1. www.icwai.org 2. www.hirmon.com 3. www.accountingcoach.com 4. http://www.accountingcoach.com/ 5. http://www.drugs.com/cellcept.html 6. http://wps.prenhall.com/bp_horngren_cost_13/
7. http://en.wikipedia.org/wiki/Mycophenolate_mofetil

8. http://www.cpa-tac.com/us/gaiyo/pdf/becker_kaitei_aud.pdf 9. http://www.college-cram.com/study/accounting/presentations/777 International Journal of Research in IT & Management http://www.mairec.org 24

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10. http://www.businessbookmall.com/Free%20Business%20Books.htm 11. http://www.accountingcoach.com/terms/F/fixed-manufacturing-overheadincurred.html 12. http://www.domain-b.com/industry/pharma/20080425_drugs.html 13. http://www.pharmaceutical-drug-manufacturers.com/pharmaceutical-policies/drugsprice-control-order.html 14. http://www.medindia.net/buy_n_sell/pharm_industry/ph_orgainisation.asp 15. Direct Survey to the company

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