A pharmaceutical company has obtained the following cost information (per 1000 tablets) based on the production of a drug in the past year: material, $150; direct labor, $100; energy, $50; overhead, 40% of direct labor and material. Presently, the process yield rate is 94%.
(a) Find the cost per tablet of acceptable product.
(b) A team evaluating the entire process has suggested improvements that led to increasing the yield rate to 96%. What is the cost per tablet of conforming product and the percent increase in capacity?
(c) Process engineers have come up with an improved sequence of operations. Labor costs were reduced by 15% and energy costs by 20% from the original values. Find the cost per tablet of conforming product now, and calculate the percentage reduction in cost.