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    Wednesday, 22 May 2019

    Calculation of RMC's (Raw Material Cost Contribution)

    Hiii All......!!!
    Good day everyone. 

    Being busy in my profession, cant spend time here. Sorry for that.

    Back with a simple post related to Cost contribution calculation, specifically Raw Material Cost Contribution.

    This will be simple with some minor known calculations.

    Before entering, i'll give you some minor definitions.





    What is Stage CC ?

    Amount of Raw Material required for manufacturing of 1 Kg of output.
    In mathematical terms, Stage CC(Cost Contribution) is the ratio of individual raw material consumption to stage output.
    How to calculate Stage CC ?

    Lets suppose, we are using two raw materials A & B and getting an output C. A, B quantities be 2, 4 Kgs and the output be 8 Kgs. Then Stage CC of A is 2/8 = 0.25 & for B is 4/8 = 0.5.

    What is Cost as per Stage CC ?

    It is the product of subject raw material price and Stage CC.

    What is Pharma CC (PCC) ?

    Simply defined as Specific amount of raw material which is required to produce 1 Kg of API material.
    Lets suppose, we are having 3 stages of API manufacturing, and the stage codes be Z-1, Z-2, Z-3.
    KSM of each stage be Y1, Y2, Y3 respectively. 
    So the Pharma CC of a raw material in Z-1 stage will be Stage CC of Z-1 stage RM x Stage CC of Y2.
    Similarly, Pharma CC of a raw material in Z-2 stage = Stage CC of subject Z-2 RM x Stage CC of Y3.




    What will be the Pharma CC (PCC) of a API stage Raw material ?

    For an API stage Raw material, Stage CC = Pharma CC.


    What is Cost as per Pharma CC ?


    It is the product of Pharma CC and price of subject raw material.



    Also Read:
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    General Scaleup calculations 

    What is % cost contribution ?


    It is the percentage of Cost as per PCC to Total cost of API.




    Now, lets get into tabulation part and i'll explain it with a case study.

    Let the process has 2 stages, one is intermediate stage and the other is API stage.
    Intermediate stage be ABC-1 and the API be ABC.




    Let the RM's used in ABC-1 stage are A, B, C, D E, F, G and the quantities of these raw materials be 10, 20, 30, 40, 50, 60 and 70 Kgs respectively. The output of the subject stage is 150 Kgs.

    Now i'll explain column wise how to prepare the RMCC sheet.

    1. Column: 1 - Raw materials & their quantities.


    Raw Material
    Qty.
    UOM
    A
    10
    Kgs
    B
    20
    Kgs
    C
    30
    Kgs
    D
    40
    Kgs
    E
    50
    Kgs
    F
    60
    Kgs
    G
    70
    Kgs
    Output
    150
    Kgs
    Upto now these are the most basic details that are required.

    2. Column: 2 - Price details


    Raw Material
    Qty.
    UOM
    Price (Rs/-)
    A
    10
    Kgs
    100
    B
    20
    Kgs
    126
    C
    30
    Kgs
    114
    D
    40
    Kgs
    108
    E
    50
    Kgs
    112
    F
    60
    Kgs
    130
    G
    70
    Kgs
    108
    Output
    150
    Kgs

    Price details of the individual raw materials to be entered.




    3. Column: 3 - Stage CC calculation [Stage CC = Input RM / Stage output]


    Raw Material
    Qty
    UOM
    Price (Rs/-)
    Stage CC
    A
    10
    Kgs
    100
    0.07
    B
    20
    Kgs
    126
    0.13
    C
    30
    Kgs
    114
    0.20
    D
    40
    Kgs
    108
    0.27
    E
    50
    Kgs
    112
    0.33
    F
    60
    Kgs
    130
    0.40
    G
    70
    Kgs
    108
    0.47
    Output
    150
    Kgs




    Also Read:
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    [How to] Evaluate reaction calorimetry study ? 

    4. Column: 4 - Cost per Stage CC calculation [Cost per Stage CC = Price x Stage CC]


    Raw Material
    Qty
    UOM
    Price (Rs/-)
    Stage CC
    Cost per Stage CC
    A
    10
    Kgs
    100
    0.07
    6.67
    B
    20
    Kgs
    126
    0.13
    16.80
    C
    30
    Kgs
    114
    0.20
    22.80
    D
    40
    Kgs
    108
    0.27
    28.80
    E
    50
    Kgs
    112
    0.33
    37.33
    F
    60
    Kgs
    130
    0.40
    52.00
    G
    70
    Kgs
    108
    0.47
    50.40
    Output
    150
    Kgs




    Now the total summation of Cost per Stage CC will give us the total cost contribution of subject stage RM's per Kg intermediate = 6.67 + 16.8 + 22.80 + 28.80 + 37.33+52+50.40 = 214.80 Rs/-.

    Next step is calculation of Pharma CC which need which is linked with API stage KSM's Stage CC.
    So, lets begin developing the API side sheet.




    5. API side RMCC:

    Let the RM used in API stage are X, Y, Z, KSM will be ABC-1 and the quantities be 100, 200, 120, 150 Kgs respectively. Output of API is 150 Kgs. Prices of X, Y, Z are 30, 90, 180 Rs/-.



    Raw Material
    Qty
    UOM
    Price (Rs/-)
    Stage CC
    Cost per Stage CC
    Pharma CC
    Cost per Pharma CC
    Intermediate Stage
    A
    10
    Kgs
    100
    0.07
    6.67


    B
    20
    Kgs
    126
    0.13
    16.80


    C
    30
    Kgs
    114
    0.20
    22.80


    D
    40
    Kgs
    108
    0.27
    28.80


    E
    50
    Kgs
    112
    0.33
    37.33


    F
    60
    Kgs
    130
    0.40
    52.00


    G
    70
    Kgs
    108
    0.47
    50.40


    Output
    150
    Kgs


    214.80


    API Stage
    ABC-1
    150
    Kgs
    214.8
    1.00
    214.80


    X
    100
    Kgs
    114
    0.67
    76.00


    Y
    200
    Kgs
    119
    1.33
    158.67


    Z
    120
    Kgs
    116
    0.80
    92.80


    Output
    150
    Kgs






    Hope that, you are clear till here.

    6. Column: 5 - Pharma CC calculation

    For API stage, Pharma CC = Stage CC,
    For intermediate stage, Pharma CC = Stage CC x API KSM Pharma CC


    Raw
    Material
    Qty
    UOM
    Price
    (Rs/-)
    Stage
    CC
    Cost per
    Stage CC
    Pharma
    CC
    Cost per
    Pharma CC
    Intermediate Stage
    A
    10
    Kgs
    100
    0.07
    6.67
    0.07

    B
    20
    Kgs
    126
    0.13
    16.80
    0.13

    C
    30
    Kgs
    114
    0.20
    22.80
    0.20

    D
    40
    Kgs
    108
    0.27
    28.80
    0.27

    E
    50
    Kgs
    112
    0.33
    37.33
    0.33

    F
    60
    Kgs
    130
    0.40
    52.00
    0.40

    G
    70
    Kgs
    108
    0.47
    50.40
    0.47

    Output
    150
    Kgs


    214.80


    API Stage
    ABC-1
    150
    Kgs
    214.8
    1.00
    214.80
    1.00

    X
    100
    Kgs
    114
    0.67
    76.00
    0.67

    Y
    200
    Kgs
    119
    1.33
    158.67
    1.33

    Z
    120
    Kgs
    116
    0.80
    92.80
    0.80

    Output
    150
    Kgs






    7. Column: 6 - Cost per Pharma CC calculation
    Cost per Pharma CC = Price x Pharma CC.


    Raw
    Material
    Qty
    UOM
    Price
    (Rs/-)
    Stage
    CC
    Cost per
    Stage CC
    Pharma
    CC
    Cost per
    Pharma CC
    Intermediate Stage
    A
    10
    Kgs
    100
    0.07
    6.67
    0.07
    6.67
    B
    20
    Kgs
    126
    0.13
    16.80
    0.13
    16.80
    C
    30
    Kgs
    114
    0.20
    22.80
    0.20
    22.80
    D
    40
    Kgs
    108
    0.27
    28.80
    0.27
    28.80
    E
    50
    Kgs
    112
    0.33
    37.33
    0.33
    37.33
    F
    60
    Kgs
    130
    0.40
    52.00
    0.40
    52.00
    G
    70
    Kgs
    108
    0.47
    50.40
    0.47
    50.40
    Output
    150
    Kgs


    214.80


    API Stage
    ABC-1
    150
    Kgs
    214.8
    1.00
    214.80
    1.00

    X
    100
    Kgs
    114
    0.67
    76.00
    0.67
    76.00
    Y
    200
    Kgs
    119
    1.33
    158.67
    1.33
    158.67
    Z
    120
    Kgs
    116
    0.80
    92.80
    0.80
    92.80
    Output
    150
    Kgs






    Its all done now. We have to know the Raw Materials Cost contribution towards Kg of API.
    The summation of Cost per Stage CC of API stage RM's 
    = 214.80 + 76 + 158.67 + 92.80 = 542.27 Rs/-.

    Sometimes we have to cross check the calculation whether it is having any flaws.





    8. Cross checking step:

    The RMC contribution should equal to the summation of Cost per Pharma CC of both Intermediate RM's and API stage RM's. 


    Remember not to include the Intermediate KSM cost per Pharma CC in the summation


    Sum = 6.67 + 16.80 + 22.8 + 28.8 + 37.33 + 52 + 50.4 + 76 + 158.67 + 92.80 = 542.27 Rs/-.


    As both were same, we may treat this as valid case and now flaw in the calculation.


    That's it......!!!


    We are done here ....!!

    These calculations we will use during presenting the improvements and profits.


    Any queries feel free to comment or message me.........!!!


    Comments are most appreciated......!!!




    Finally, the above mentioned prices of RM's are the first 10 ODI scores of Delhi Dasher Virender Sehwag.


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    About The Author


    Hi! I am Ajay Kumar Kalva, Currently serving as the CEO of this site, a tech geek by passion, and a chemical process engineer by profession, i'm interested in writing articles regarding technology, hacking and pharma technology.
    Follow Me on Twitter AjaySpectator & Computer Innovations


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