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Copy of Lorex Pharmacueticals
Transcript of Copy of Lorex Pharmacueticals
Lorex needs to determine the target amount to which each of the 10 ounce bottles of Linatol should be filled.
Lorex Pricing Plan
Lorex is currently planning to price each bottle of Linatol sold at $15.50 per 10 ounces.
Linatol is blended in 5,000 liter batches.
Product is bottled on one of the semi-automatic filling lines.
At top speed, 1,000 bottles of Linatol could be filled.
Production rate was set to average 500 cases in an 8-hour shift.
Standard Deviation 0.1714
Data is normally distributed.
Volume, Cost and Revenue Forecast
Conclusion and Recommendation
Lorex Pharmaceuticals: Case Analysis
Underfilled bottle attendants with hourly pay of $8.50 per hour.
Cost of Materials per bottle $1.10.
Overhead rate of $89.50 per hour for Linatol production line.
Line operated by 2 employees with hourly pay of $12.80.
Lorex Projected Operating Profit
Filling Line Test Results
Develops, designs and tests drugs for use to treat various diseases and conditions.
Responsible for complying with regulatory agencies and ensuring the safety of all medicine distributed.
Top 15 Pharmaceutical Companies
(Based upon Sales)
New product, Linatol recently introduced to regulate blood pressure.
Lorex has been working on developing and patenting Linatol for the past 8 years.
Through years of testing and clinical studies, the FDA has approved the production and distribution of Linatol.
Linatol is set to begin a one shift production soon.
The Marketing Division has determined the Linatol will be sealed in 10 ounce bottles and packaged 12 per case.
Carter Blakely, Quality Assurance Manager for the Manufacturing Division has been tasked with overseeing the production of Linatol.
The Linatol mix is a very confidential formula.
Current Production Problems
1. Each bottle of Linatol is filled at a slower rate than Lorex's other products based on machinery used.
2. The machine used to fill bottles with Linatol are not 100% accurate.
3. Bottles not filled at 10 ounces by the machine must be hand filled by employees at an additional expense.
Optimize profit by maximizing the
efficiency of the semiautomatic
Determine fill target of 10 ounce bottles that optimizes profit.
Reduce seconds by improving accuracy in filling bottles.
A-Choose an amount (volume) of Linatol that is in line with the same type of drugs already being produced by competitors.
By doing so Lorex could use the same manufacturing equipment and manufacture quantities equal to another drug being produced and do away with the old machine that will manufacture Linatol.
B-Choose an amount (volume) of Linatol that is in line with another type of drugs already being produced by Lorex.
Consider re-evaluating the current shift schedule and decreasing attendants who handle underfilled bottles.
Purchase a production machine which will allow more accurate fillings of the 10 ounce bottles, reducing a second manual fill.
We recommed that Lorex fill each bottle with 10.3 ounces of Linatol.
Filling each bottle with this amount warrants the greatest profit while decreasing the cost associated with seconds packaging labor.
The Filling Line Test Plan
Lorex determined that it would be best to determine a filling level by using an inexpensive liquid with similar physical properties as Linatol.
After the filling process was "perfected", samples of the bottles were measured individually.
Lorex Fill Target
Lorex determined that the 10.2 ounce filling target for the test had no economic justification.
In the past Lorex picked a target that was one standard deviation above the required amount, which is 10.2 ounces.
Lorex did not take into consideration an cost or pricing associated with setting the fill line of 10.2 ounces, therefore an amount must be selected that will maximize profit.
Recommending Filling Volume