Common use of Quality Assurance Costs Clause in Contracts

Quality Assurance Costs. Direct labor and indirect costs for Quality Assurance departments testing and approving materials used in manufacturing and completed manufacturing batches and finished products. This includes all manufacturing in-process testing and testing of finished materials. Excluded from product costs are QA costs related to research and development, stability testing, etc. The following expenses are not included in manufacturing costs: a) Inventory Carrying Costs b) Regulatory Affairs Costs (except as set forth above) c) Pilot plant costs, research batches and other similar costs prior to turnover to manufacturing. These are handled as development costs and expensed to R&D. This excludes commercial goods produced by a research facility. d) Costs incurred by Manufacturing for special projects, or for Schering-Plough Research Institute requests, to establish and certify new production processes, batch sizes and product line improvements, and new vendor certification of equipment and primary materials components. These costs are expensed to R&D. e) Manufacturing start-up costs and initial one-time extraordinary manufacturing costs incurred prior to plant operation and achievement of a normal production activity level. Includes costs of training, testing, qualification/validation of new equipment and facilities and initial trial batches. These costs are deferred and then amortized to Other Production Costs over five years. f) Significant idle capacity is eliminated from factory overhead and product cost. Idle or excess capacity costs are culled out of the Manufacturing Budget and expensed as a period cost to Other Production Costs. g) Finished goods warehousing, shipping and other distribution costs. These are included in distribution costs which are part of marketing expenses. h) Product liability and/or business interruption insurance expenses.

Quality Assurance Costs. Direct labor and indirect costs for Quality Assurance departments testing and approving materials used in manufacturing and completed manufacturing batches and finished products. This includes all manufacturing in-process testing and testing of finished materials. Excluded from product costs are QA costs related to research and development, stability testing, etc. The following expenses are not included in manufacturing costs:. a) Inventory Carrying Costs b) Regulatory Affairs Costs (except as set forth above) c) Pilot plant costs, research batches and other similar costs prior to turnover to manufacturing. These are handled as development costs and expensed to R&D. This excludes commercial goods produced by a research facility. d) Costs incurred by Manufacturing for special projects, or for Schering-Plough Research Institute requests, to establish and certify new production processes, batch sizes and product line improvements, and new vendor certification of equipment and primary materials components. These costs are expensed to R&D. e) Manufacturing start-up costs and initial one-time extraordinary manufacturing costs incurred prior to plant operation and achievement of a normal production activity level. Includes costs of training, testing, qualification/validation of new equipment and facilities and initial trial batches. These costs are deferred and then amortized to Other Production Costs over five years. f) Significant idle capacity is eliminated from factory overhead and product cost. Idle or excess capacity costs are culled out of the Manufacturing Budget and expensed as a period cost to Other Production Costs. g) Finished goods warehousing, shipping and other distribution costs. These are included in distribution costs which are part of marketing expenses. h) Product liability and/or business interruption insurance expenses.