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Digg It - Practical Accounting 2
Different methods of allocating costs
First, we will start with Direct Costs. In the previous article I indicated that it is advisable to allocate direct or (known) costs to the product
First, we will start with Direct Costs. In the previous article I indicated that it is advisable to allocate direct or (known) costs to the product
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
or service whenever possible.
There are a number of methods used. The most common one being used by service type industries such as the local mechanic:-
DIRECT COSTS
Job Costing
For
There are a number of methods used. The most common one being used by service type industries such as the local mechanic:-
DIRECT COSTS
Job Costing
For
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
some, this takes the form of a docket book in which they write down each expense relative to the job being undertaken. In larger workshops and small factories there is often a job sheet or card
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
that follows the product along the assembly line. These can be specially printed, or with many of the Small to Medium Enterprises (SME) the accounting package used may print one.
On jobs that
On jobs that
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
xtend over a longer period if these cards are collected and entered into the accounting program then the value of Work in Progress for each job may be obtained. It is also possible to see how a
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
tual costs compare with those in the quotation.
One of these expenses is of course Workshop Labour. Few firms are ever able to track each employee's direct labour cost as the employee often is
One of these expenses is of course Workshop Labour. Few firms are ever able to track each employee's direct labour cost as the employee often is
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
shifted from one job to another too frequently for this to be practicable. The clerical cost of this recording of labour is also prohibitive.
Once a firm has been able to establish a cost his
Once a firm has been able to establish a cost his
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
ory for labour the most sensible way of allocating this is to establish how many different categories of employee are on the payroll. That is, an average cost may be established for a superviso
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
, another average cost for leading hands, another for permament tradesmen and yet another for casual employees. With apprentices, there may be different average rates based on years of training
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
All these labour rates should take into account not only gross wages paid, but also such extra costs as employer superannuation contribution, WorkCover levy, any regular tool or car allowance
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
, and any salary sacrifice costs that affect the employer.
Process or Batch Costing.
The theory here is not much different to Job Costing except that instead of the costs being allocat
Process or Batch Costing.
The theory here is not much different to Job Costing except that instead of the costs being allocat
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
ed to a specific job to be charged out, they are being allocated to a production run of some product. The end result is that an average cost can be established for one of a number of products b
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
ing processed at one time.
Standard Costs
These are established by larger firms such as automotive manufacturers. When a production run is scheduled the costs are accumulated at standa
Standard Costs
These are established by larger firms such as automotive manufacturers. When a production run is scheduled the costs are accumulated at standa
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
d contract rates as soon as Purchase Orders are issued. A detailed analysis is subsequently undertaken of the costs of over or under supply of materials and labour. Even the costs of wear and t
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
ar of plant are charged against the run based on standard machine hours that should occur.
I consider that it is unlikely that any SME would need to consider seven variable Standard Cost repor
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
ing.
INDIRECT COSTS
These are usually associated with the cost of running the front office, sales team costs, advertising and any other cost that can not be reasonably allocated direct
INDIRECT COSTS
These are usually associated with the cost of running the front office, sales team costs, advertising and any other cost that can not be reasonably allocated direct
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
to the Job or Process Cost.
As mentioned in the previous article all costs have to be recovered, and provision made for replacement of plant (as distinct from depreciation of historic cost by
As mentioned in the previous article all costs have to be recovered, and provision made for replacement of plant (as distinct from depreciation of historic cost by
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
the Tax Agent), and of course a profit for the investors. The most usual method of applying these indirect or on-costs is as a percentage to be added to the Direct or known costs.
Modern accou
Modern accou
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
ting software for SME provides for Plussage to be added to purchase cost e.g. in MoneyWorks Gold, and when the selling price is shown, the percentage mark-up can be set to also show on the scre
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
n. This then enables the salesperson to know how much they can safely reduce the price if bargaining is practiced.
A future article will deal with the concepts of budget setting in more detail
A future article will deal with the concepts of budget setting in more detail
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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