# Pharma Engineering

For Engineer By An Engineer

• ## Wednesday, 22 May 2019

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.

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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

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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.........!!!

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

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