Lorex Pharmaceuticals has come up with a new product, Litanol. This medicine seems to have a high potential which is developed for the treatment of high blood pressure. Company has come up with a manufacturing line and production is supposed to be begin next Monday.
Following points are considered while analyzing the case:
1. The marketing team has decided to sell Litanol in sealed 10-ounce bottles, packaged in cases of 12 bottles each with a wholesale price of $186 per case.
2. The production capacity is 1000 bottles per case but due to certain unavoidable reasons, Lorex is producing Litanol at an average of 500 cases over an eight-hour shift.
3. The entire line was operated by two employees who are paid $12.80 per hour.
4. Other charges include $89.50 per hour for overhead and filling $1.10 per bottle.
5. Bottles filled with less than 10 ounce are rejected and sold for 80% of normal price.
6. Attendants for secondary packaging are paid $8.50 per hour.
7. A sample of filling
process and test results is given in exhibit 2, with target of 10.2 fluid ounces.
8. The cost details from exhibit 1 are used to guesstimate for cost of other predicted samples (10.3, 10.4, 10.5 and 10.6 ounce samples).