Pharmaceuticals

Dear Mr.Blakely,

Lorex pharmaceuticals receive approval from FDA to sell Linatol, a highly promising medicine for high blood pressure. The problem at hand is to determine the target fill rate that the filling line has to be set at in order to maximize the profits. The target fill rate should be high enough to reduce the number of under-filled bottles and at the same time it should be low-enough to minimize the wastage of the drug. The purpose of this memo is to consider all the relevant costs and other parameters before recommending an ideal target fill rate to achieve the maximum profit possible.

After careful analysis, the optimal target fill rate is determined to be 10.3 ounces. To arrive at this target fill rate of 10.3oz, various target fill rates ranging from 10.1oz through 10.5oz are compared. Summary of the results are given in the following table:

Target Fill Rate (Oz) No Of Cases for 5000 liters Proportion Filled Properly Revenue Per case ($) Total Cost per case ($) Contribution per case ($) Total Profit ($)

10.00 1409.07 0.50 167.40 65.05 102.35 144222.10

10.10 1395.12 0.73 176.11 65.38 110.73 154477.67

10.20 1381.44 0.89 182.07 65.76 116.31 160673.75

10.25 1374.70 0.94 183.80 65.98 117.83 161975.30

10.30 1368.03 0.97 184.87 66.20 118.67 162337.17

10.35 1361.42 0.99 185.47 66.44 119.03 162042.94

10.40 1354.87 0.99 185.77 66.68 119.09 161345.78

10.50 1341.97 1.00 185.97 67.18 118.79 159413.52

10.60 1329.31 1.00 186.00 67.67 118.32 157289.94

As evident, the profits realized are maximized at 10.3oz at $162337.17. The calculations performed for this summary are presented in Exhibit xxxx. And the overall analysis is presented in a detailed fashion in the rest of this memo.

Here are few points that are considered from the inputs provided by Lorex Pharmaceuticals in Exhibit xxxx.

1. The Marketing division at Lorex had decided the Linatol would be sold at a price of $186 per case, each case having 12 bottles of 10oz liquid.

2. Though the...