Sam's Pharma manufactures drugs for hospitals. Sam also outsources drugs from Asia if the drugs are...

 

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Sam's Pharma manufactures drugs for hospitals. Sam also outsources drugs from Asia if the drugs are cheaper than production costs of his own. The following cost information are provided: + Drug A Drug B Drugs Production (in Units) Direct material (per unit) Direct labor (per unit) Variable overhead (per unit) Fixed cost (per unit) Selling price (per unit) 4 Imported price → J Required 20,000- $ 0.80 3 1.60- 0.40 0.80€ 4.00€ 2.75 40,000+ $1.00- 2 1.80€ 0.60 1.00- 5.000 4.20 a. Calculate the profit assuming that the company will produce all the drugs by itself. b. Based on cost only, any drug will be recommended for outsource? c. How would your recommendation affect profit? By how much? d. What factors would be considered by the management about outsourcing? Drug C 80,000+ $ 0.40 4 0.80€ 0.20 0.40- 2.000 2.00- 5 12 P P P5 12 25 Sam's Pharma manufactures drugs for hospitals. Sam also outsources drugs from Asia if the drugs are cheaper than production costs of his own. The following cost information are provided: + Drug A Drug B Drugs Production (in Units) Direct material (per unit) Direct labor (per unit) Variable overhead (per unit) Fixed cost (per unit) Selling price (per unit) 4 Imported price → J Required 20,000- $ 0.80 3 1.60- 0.40 0.80€ 4.00€ 2.75 40,000+ $1.00- 2 1.80€ 0.60 1.00- 5.000 4.20 a. Calculate the profit assuming that the company will produce all the drugs by itself. b. Based on cost only, any drug will be recommended for outsource? c. How would your recommendation affect profit? By how much? d. What factors would be considered by the management about outsourcing? Drug C 80,000+ $ 0.40 4 0.80€ 0.20 0.40- 2.000 2.00- 5 12 P P P5 12 25

Answer rating: 100% (QA)

A The profit is calculated as follows if drugs produced by itself Total Revenue Total cost DrugA Rev... View the full answer