MANAGEMENT ACCOUNTING

APPLICATION OF MARGINAL COST TECHNIQUES WITH

REFERENCE TO GURMAIL MEDICAL HALL
FY-E
BATCH 2021-2024
Submitted To: Ms. Soma Kulshrestha

NAME ROLL NUMBER PRN

1) Mehul Aggarwal 1467 21020621456

2) Diya Wadhwa 1423 21020621151

3) Saksham Singhal 1461 21020621333

4) Abir Sehgal 1401 21020621042

5) Hitansh Doshi 1428 21020621171

7) Tanya Surana 1479 21020621402

 INDEX

SERIAL TOPIC PAGE NUMBER

1. INTRODUCTION 3

2. OBJECTIVES OF THE STUDY

3

3. DATA COLLECTION
METHODS 6

4. DATA ANALYSIS AND

INTERPRETATION 9

5. FINDINGS
13

6. LIMITATIONS AND
SUGGESTIONS 19

7. CONCLUSION
21
 8. QUESTIONNAIRE
21

9. REQUISITE PROOFS
22

Introduction to the business

● Gurmail Brothers is a leading healthcare organization headquartered
in Ludhiana, Punjab
● Gurmail brother was conceptualized in 1965 with the opening of a
retail drug counter – the first in Ludhiana operating 20 hours/day.
● Gurmail Brothers have always focused on providing accessible and
innovative therapies for medical practitioners and patients
● Gurmail Brothers has a fully functional organization working across all
verticals, and a strong nationwide presence with a Highly Passionate,
Energetic, Self Driven Sales team and a solid distribution network.
● The core strength of Gurmail Brothers is STRONG RELATIONSHIPS
in the field of Gastroenterology, Hepatology, Cardiology, Nephrology,
Dermatology ,Plastic Surgery & Oncology.
● GUTRON the flagship brand of Gurmail Brothers, has crossed the
USD 2M mark within a year of launch.
History & Timelines
​ 1965 – Gurmail Medical Hall was founded by Sardar Man Singh and Sardar Bhagwan
Singh
​ 1984 – Gurmail Medical Centre established
​ 1993 – Gurmail Drug Store established
​ 1993 – Forayed into Wholesale and Distribution
​ 2000 – Gurmail Brothers established
​ 2006 – Formed Elation Pharma for Contract Manufacturing
​ 2016 – Launched GUTRON
​ 2017 – Launched MEXOHAR GUTRON crossedUSD 2M Mark
​ 2018 – Introduced 6 more products in Hepato Segment & Launched Cardiac
Business

Nationwide Presence
 Sales network

Headquarters Ludhiana

Sales HQ New Delhi

GM 1

NSM 1

RSM 7

ASM 9

Sales Associates 50

Distributor Network

Super Distributors 6

Distributors 20
MISSION & VISION OF BUSINESSc

Vision

To become a respected and preferred choice partner to health care

providers by offering innovative products and services that bridge the GAP
arising out of unmet medical needs and available solutions in India.

Mission
To be India's most trusted Healthcare Sales Organization. To become a
preferred choice partner to MNC's seeking sales and marketing presence in
India.
 Emerging trends in the pharmaceutical
industry
With the use of AI and machine learning, the sector has begun to focus
on its capacity to match expanding client demands. Pharmacovigilance,
federated learning, natural language processing, and computer vision
are all being highlighted. Nonetheless, the year 2022 requires pharma to
expand its horizons and pay attention to all pharmaceutical industry
trends that will affect the worldwide market this year.

1. Pharmacovigilance market will scale up

Medicines and vaccinations frequently produce unintended and unpleasant
side effects. This perilous trend necessitates a greater focus on the quality
of the medications and the consequences of their use. Pharmacovigilance
is derived from the Greek term Pharmakon, which means medicinal
material, and the Latin word Vigilia, which means to keep watch. It is a
series of scientific efforts aimed at reducing negative drug reactions and
other medication-related safety issues. Its ultimate goal is to improve the
benefit-to-risk ratio of healthcare items by sharing correct information with
patients and health care providers.

There's no denying that the pharmacovigilance sector is booming.

According to Fortune Business Insights, the worldwide pharmacovigilance
market will rise at a CAGR of 13.1 percent from $6.28 billion in 2021 to
$14.85 billion in 2028. Northern America, particularly the United States, will
once again account for the lion's share of the market. The market size in
North America has already reached $2.23 billion in 2020, as illustrated in
the graph below, contributing to the region's global leadership in
pharmacovigilance.

Fig. 1. Predicted growth of the North America pharmacovigilance market

The business has become oversaturated with data as a result of the

significant increase in worldwide databases in recent years, which can
make it difficult to discern positive or negative trends. Excessive data
distortion, in other words, can prohibit companies from detecting
medication errors, off-label use, acute and chronic poisoning, and a variety
of other negative drug consequences.
Meanwhile, in addition to establishing secure preclinical and clinical
software, developing safe and effective treatment necessitates massive
amounts of high-quality data. It's easy to see why pharmacovigilance will
be the top trend in pharma for years to come, given that it allows
corporations to use data mining for key decision-making and risk
assessment.

2. High-tech will fuel advancement in R&D

Ten American pharmaceutical companies spent an average of $2.8 billion
on testing, marketing approval, and post-approval research and
development between 2013 and 2021, bringing 106 new medications to
market (R&D). While the R&D phase is still important to the industry's
"end-users," it's difficult to dispute that the pricing mentioned above yearns
for a better cost-efficiency ratio.

Continuous digital transformation, aimed at lowering the R&D price while

simultaneously enhancing its efficiency, will become one of the leading
tendencies in 2022. High-tech solutions for R&D can help pharma
organizations refine multiple processes:

● Identify appropriate drugs for specific conditions

● Run cost-effective trials for drug design
● Accurately allocate resources to start and change medical treatments
● Improve algorithms for drug research and development
 ● Offer valuable insights into business strategies
● Gather health data more efficiently
● Improve patient engagement

According to the list above, R&D is one of the top goals for business
development in the next five years for 63 percent of respondents in a
recent Deloitte survey. Over the next few years, life-sciences organisations
around the world hope to improve the production cycle with AI, machine
learning, cloud technology, and other digital expenditures.

3. Data analytics will accelerate biotechnology innovation

Why are some medications effective when their counterparts aren't?
Machine Learning algorithms can help uncover the solution to this question,
but data analytics is required for the technology to work. Combining these
technologies can potentially improve predictive medicine by allowing
researchers to track the effects of various medications on different patient
groups over time.

The life sciences business is more intertwined with data analytics than ever
before, thanks to advances in genetics and disease research. Big data
analysis is particularly beneficial for discovering specific patterns in clinical
trial results and improving drug development. Understanding implicit
patterns in large data can also aid manufacturers in better anticipating
patient responses to drugs and analysing diagnostic outcomes.
Furthermore, the data analytics market is predicted to grow fast. The
market for corporate intelligence and analytics software applications will
reach roughly $16.5 billion in 2022, according to Shanhong Liu, a research
expert in the worldwide software development sector.

Here are some of the benefits of implementing big data analytics in the
pharmaceutical and healthcare industries:

● Early stage disease detection and high-risk patient identification.

Today, it is possible to identify specific patterns of how a patient is
likely to metabolize drugs. Having these predictions at hand is an
especially beneficial tool in oncology and neurology.
● Preventative care strengthening. Big data analytics allows health care
professionals to select treatment plans that are tailor-made for the
unique needs of their patients.
● Modeling of disease spreading and the development of new mass
disease prevention strategies. Technologies can make it possible to
prevent and control pandemics via close contact screening, online
public opinion monitoring, virus host analysis, and pandemic forecast
evaluations.

● Data analytics applications within the pharmaceutical industry are still

accompanied by challenges, such as finding the right partners and
regulatory expertise for advanced innovation. However, 2022 is likely
to bring advancement in this field.
 4. New operating models will bring much-needed agility
The change of the sector is strongly reliant on new capabilities and
expertise. Organizations are reevaluating their network expenses and
operating methods as the volume of distributed remote work grows. This
tendency will very certainly result in talent dispersal, allowing production to
become more flexible. For example, the need to work on-site may become
less pressing. As a result, the post-COVID-19 workforce will be more
adaptable to change, resulting in more evenly distributed businesses.

It also illustrates a growing demand for people who can programme,

operate, and interpret data while keeping up with technology
advancements. This strategy will also result in up-skilling and integrated
capacity-building, as well as assisting staff in remaining flexible in the face
of change. Here are some of the most important pharma trends for 2022,
with agility and rearrangement at the top of the list.
Fig. 2. Potential changes in operating models within pharmaceutical organizations

Marginal Costing
Marginal Costing is a costing technique wherein the marginal cost, i.e.
variable cost is charged to units of cost, while the fixed cost for the period is
completely written off against the contribution.

The term marginal cost implies the additional cost involved in producing an
extra unit of output, which can be reckoned by total variable cost assigned
to one unit. It can be calculated as:

Marginal Cost = Direct Material + Direct Labor + Direct Expenses +

Variable Overheads

Objectives of the study

The purpose of this project is to study recent real-life application of

marginal costing with particular reference to marginal cost-pricing for
manufacturing units. The following objectives of marginal costing were
particularly relevant to this study:

1. To determine and compare the costs and profit associated with various
levels of production.

2. Classification of the various costs under the headers of Fixed Cost

and Variable Cost.

3. The various measures under i.e. profit volume ratio, break- even point
margin of safety and how these measures fluctuate in conjunction with
each other.
Along with testing real-life application of textbook theories, we have also
attempted to gauge our own conclusions from our analysis of the variables.

Data collection methods

Although focused on qualitative management research, the interviews were

quite wide ranging thoroughly explored the topics at hand. The data
collected was primary in nature and every effort was made to maintain the
sanctity of the data to make it viable for the purpose of this accounting
report. The process of data collection was relatively exhaustive of monetary
and manpower resources available at our disposal. Individuals were initially
contacted by e-mail or telephone. We outlined the nature of the project and
the contribution we felt the individual could make to this. We explained that
all the material gathered would be considered confidential within the
research team.

Data analysis and Interpretation

Data collected

Units Sold Month Sales Profit Profit %

700 Aug 28000 125 0.45%

800 Sept 32000 2000 6.25%

1200 Oct 48000 9600 19.79%

1300 Nov 52000 11375 21.38%

2000 Dec 80000 24500 30.63%

1200 Jan 48000 9500 19.79%

Working notes

The following formulas were implemented in excel to compute the requisite values for
this research endeavour:

NAME FORMULA USED

Contribution Sales – Variable cost

Profit Volume analysis (P/V analysis) CONTRIBUTION X 100

SALES

FIXED COST
Break Even Point (In Rs) P/V ratio

PROFIT
Margin of Safety P/V ratio
 .

Findings

1. The trend observed in the data collected and industry research

showed that the sales of the product in question was directly
proportional to the seasons and disease followed.

2. The profit grew disproportionately as the number of units sold of the

product in question increased. The team hypothesized that this
happened because the burden of the fixed cost that existed regardless
of number of units produced went down with growth in sales.

3. The breakeven-point and profit volume ratio as taught in the

classroom, remained the same throughout the 6-month period.

4. The margin of safety was extremely susceptible to change as it

fluctuated wildly over the 6-month period with it reaching its peak in
December 2019 at 52266.67 rupees and its lowest at 266.67 rupees in
August 2019.
 Limitations and Suggestions

LIMITATIONS

· One of the major limitations has to be the fact that we are students and not analysts
or researchers. Collection of data and analysis of it was done with the knowledge
and skills we have.

· Collecting accurate and detailed data was not possible. We could only get a ball park
figure and not the exact data.

· Since the project was conducted near SYMPULSE, our college fest, and most of the
members of our group were a part of the organizing committee, there were added
problems.

SUGGESTIONS

(1) Mandatory presence of graduate-level pharmacists at community

pharmacies

(2) Clear demarcation of the roles and responsibilities of different categories of

pharmacists

(3) Effective categorization and implementation of medicines into (a)

prescription medicines (b) pharmacists only medicines (c) over the counter
medicines

(4) Enforcement of laws and regulations for the sale of medicines

(5) Prohibiting doctors from dispensing medicines (the dispensing separation

between pharmacists and doctors).
(6) Involving pharmacies and pharmacists in Universal Health Coverage
Schemes to improve the affordability of medicines

(7) Strengthening national medicines regulatory authorities to improve the

quality, safety, and effectiveness of medicines

(8) Training of pharmacists in clinical skills, vaccination, and minor ailment

schemes

(9) Promoting independent medicines information for consumers and

healthcare professionals by developing national medicines information strategy

(10) Mandatory Continuing Professional Development (CPD) programs for the

Pharmacists.

Questionnaire

Q1 – When was the organization established and who is the founder?

Q2 – What are your specialties and which is your most selling product?

Q3 – How many branches do you have?

Q4 – How has the advent of services of Swiggy and Zomato affected your
business?

Q5 – How have the preferences of the customer changed since the

inauguration of your enterprise?

Q6 – What is the rent of the shop and the factory combined?

Q7 – How many employees work for your enterprise? What is the total
amount that you pay in wages?

Q8 – What are your total factory expenses?

 CONCLUSION
The project in question was a very effective exercise in the process of
accounting. It was a very seamless amalgamation of classroom
learning and real-world experience. It required all team members to
collaborate in a way that was unprecedented in our academic careers.
It served as a process that allowed us to walk a mile in the life of an
accountant. The process of data collection and analysis involved in this
report has gone a long way in cementing the conceptual clarity needed
with reference to the concepts of marginal costing.

Requisite proofs