Standard/Budgeted Cost of Purchased Materials is provided by Procurement Department at the

start of Budget Cycle. This is usually in May-June of the current year and they are for the
next/budget year e.g. 2015 Budget Cost of Purchased Materials was provided by Procurement
during May-June of 2014. These budgeted prices are then checked by PGS Finance for
appropriateness considering past trends and current inflation and if correction is required, PGS
Finance refers back to Procurement. Overall responsibility of providing Purchased Materials
Prices is with Procurement Department. Therefore the first statement in 4.2 finding is incorrect.
Wyeths total Actual Purchases for the year 2015 is PKR 1,565 M whereas Price Variance
excluding Exchange Rate Variance is PKR 41 M (Fav.) which is 2.6% of actual purchases. Price
Variance including Exchange Rate is PKR 26 M (Fav.) which is 1.66% of actual purchases.
Pfizers total Actual Purchases for the year 2015 is PKR 3,051 M whereas Price Variance
excluding Exchange Rate Variance is PKR 76 M (Fav.) which is 2.5% of actual purchases. Price
Variance including Exchange Rate is PKR 18 M (Unfav.) which is 0.6% of actual purchases.
Total value of 21 Instances reported in the 4.2 Finding is PKR 5 M which is only 0.3% of total
purchases and these instances are due to alternate source development, supply discontinuance
from cheaper source, price reduced due to negotiations, revision in artwork and small order
quantity etc.
Furthermore, reduction from 55 items in 2014 to 21 items in 2015 is itself a proof that
Management is carefully looking at variances and taking appropriate steps.
In view of the above facts, Management is confident that there is no risk in current standard
costing process as we are monitoring variances on timely basis and this observation is invalid.