Beximco pharmaceuticals ltd

1. Beximco Pharmaceuticals Ltd
Beximco Pharmaceuticals Ltd (Beximco Pharma) is an emerging generic drug player committed
to providing access to affordable medicines. Company’s state-of-the-art manufacturing facilities
have been accredited by the regulatory authorities of USA, Australia, European Union, Canada,
and Brazil, among others, and it currently focuses on building presence in many emerging and
developed markets around the world.
Beximco Pharma is consistently building upon its portfolio and currently producing more than
500 products encompassing broad therapeutic categories and the Company has created strong
differentiation by offering a range of high-tech, specialized products which are difficult to
imitate.
The main manufacturing site is spread across a 22-acre area located near the capital city, Dhaka,
which houses facilities for manufacturing tablets, capsules, intravenous fluids, liquids, creams,
ointments, suppositories, metered dose inhalers, ophthalmic drops, large volume parenterals,
sterile ophthalmics, prefilled syringes, lyophilized injectables etc. The site has its own utility
infrastructure to ensure adequate generation and distribution of electricity with an installed
capacity of 10 MW, besides having water purifying and liquid nitrogen generation facilities. Our
penicillin units (both API and formulation) are located separately at Kaliakoir, 21 km from the
main site.
Beximco quality cost report is to be based on the following data:
Depreciation of test equipment ........................................ $75,000
Rework labor and overhead ............................................. $11,000
Quality circles .................................................................. $46,000
Quality training................................................................ $94,000
Test and inspection of incoming materials ...................... $64,000
Product recalls ................................................................. $71,000
Net cost of scrap .............................................................. $12,000
Re-entering data because of keying errors ...................... $52,000
Cost of field servicing and handling complaints ............. $25,000
Required:
Prepare a Quality Cost Report in good form with separate sections for prevention costs, appraisal
costs, internal failure costs, and external failure costs.
The following data (in thousands of dollars) have been taken from the accounting records of
Beximco for the just completed year.
Sales ................................................................................ $870
Purchases of raw materials ............................................. $190
Direct labor ..................................................................... $200
Manufacturing overhead ................................................. $230
Administrative expenses ................................................. $150
Selling expenses .............................................................. $140
Raw materials inventory, beginning ............................... $10
Raw materials inventory, ending .................................... $40

2. Work in process inventory, beginning ............................ $20
Work in process inventory, ending ................................. $50
Finished goods inventory, beginning .............................. $90
Finished goods inventory, ending ................................... $130
Required:
a. Prepare a Schedule of Cost of Goods Manufactured in good form.
b. Compute the Cost of Goods Sold.
c. Using data from your answers above as needed, prepare an Income Statement in good form.
Beximco uses job-order costing. At the beginning of the year, the company's inventory balances
were as follows:
Raw materials ................................ $36,000
Work in process ............................. $41,000
Finished goods ............................... $104,000
The company applies overhead to jobs using a predetermined overhead rate based on
machine-hours. At the beginning of the year, the company estimated that it would
work 21,000 machine-hours and incur $210,000 in manufacturing overhead cost. The
following transactions were recorded for the year:
a. Raw materials were purchased, $346,000.
b. Raw materials were requisitioned for use in production, $338,000 ($302,000 direct
and $36,000 indirect).
c. The following employee costs were incurred: direct labor, $360,000; indirect
labor, $68,000; and administrative salaries, $111,000.
d. Selling costs, $153,000.
e. Factory utility costs, $29,000.
f. Depreciation for the year was $102,000 of which $93,000 is related to factory
operations and $9,000 is related to selling and administrative activities.
g. Manufacturing overhead was applied to jobs. The actual level of activity for the
year was 19,000 machine-hours.
h. The cost of goods manufactured for the year was $870,000.
i. Sales for the year totaled $1,221,000 and the costs on the job cost sheets of the
goods that were sold totaled $855,000.
j. The balance in the Manufacturing Overhead account was closed out to Cost of
Goods Sold.
Required:
Prepare the appropriate journal entry for each of the items above (a. through j.). You can assume
that all transactions with employees, customers, and suppliers were conducted in cash.
Beximco Pharma used the FIFO method in its process costing system. The following data
concern the operations of the company's first processing department for a recent month.
Work in process, beginning:
Units in process ................................................................ 500
Stage of completion with respect to materials ................. 60%
Stage of completion with respect to conversion............... 70%
Costs in the beginning inventory:
Materials cost ................................................................ $1,020
Conversion cost ............................................................. $8,925

3. Units started into production during the month ................... 10,000
Units completed and transferred out ................................... 9,600
Costs added to production during the month:
Materials cost ................................................................... $31,488
Conversion cost ................................................................ $259,548
Work in process, ending:
Units in process ................................................................ 900
Stage of completion with respect to materials ................. 60%
Stage of completion with respect to conversion............... 90%
Required:
Prepare a production report for the department using the FIFO method.
Beximco operates a medicine delivery service across the nation. The company keeps detailed
records relating to operating costs of trucks, and has found that if a truck is driven 150,000 miles
per year the average operating cost is 10 cents per mile. This cost increases to 11 cents per mile
if a truck is driven only 100,000 miles per year. Assume that all of the activity levels mentioned
in this problem are within the relevant
range.
Required:
a. Using the high-low method, derive the cost formula for truck operating costs.
b. Using the cost formula you derived above, what total cost would you expect the company to
incur in connection with the truck if it is driven 130,000 miles in a year?