ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 1 of 15
School of Chemical Engineering and Chemistry

CHAPTER 1: INTRODUCTION


Name of Enterprise: The Bubble Tea House
Our enterprise focuses on selling cold and refreshing tea beverages that is relatively delicious and thirst-quenching. Due
to the increase in the demand of tea beverages that are usually served by tea shops or cafs, it serves as an opportunity
to create an income-generating activity which provides the tea beverage at a reasonable price without compromising
the taste and quality of the product.
The Bubble Tea House will serve bubble tea cold beverage at 12, 16, and 20 ounce servings that will be sold at 120, 160,
and 200 PhP respectively per size. The customer will have the freedom to choose the bubble tea flavoring they
preferred.
Table 1 shows a close estimation of the cost of each raw material used for the production of 1 liter of bubble tea. Table 2
presents the cost of per serving of the bubble tea in terms of the serving size and the total cost of the raw materials. The
selling price indicated projects a 2% profit.
Table 1. Raw Materials for the Production of 1 L Bubble Tea
Raw Materials Price (Php)
Tea (Black Tea) 67.50
Matcha Powder 110
White Sugar 5
Flavorings 3
Tapioca Pearls 24
Milk 62
Ice 5
Water 45
Grenadine Syrup 10
Total 331.5

Table 2. Estimated Cost and Selling Price for Each Serving
Servings (Ounces) Cost (Php) Selling Price (Php)
12 117.64 120
16 156.86 160
20 196.07 200

Members:
Herrera, Raissa Anne S.
Lagamayo, Linear Larie L.
Malsin, Rogel Roy J.
Pizaa, Amazing Grace R.
ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 2 of 15
School of Chemical Engineering and Chemistry
CHAPTER 2: ACCOUNTING PRINCIPLES
Transactions:
The following are the transactions for the month of March (First Month) 2014:
a) Each member of the group shared money from their own savings with a sum of Php700,000 to start a tea business
b) Purchased land worth Php250,000
c) Purchased tea house worth Php150,000
d) Purchased furniture for the store worth Php75,000 on account
e) Purchased supplies good for one month worth Php90,000
f) Purchased equipment for Php30,000
g) Purchased supplies worth Php15,000 on account
h) Customer ordered worth Php35,000 for a party, paid Php7,500 and promised to pay the rest
i) Paid debt on account worth Php28,500
j) Paid newspaper ad for Php2,950
k) Customer with debt paid Php7,000
l) Applied for an insurance policy worth Php10,000
m) Insurance worth Php1,250 has expired.
n) Bought a motorcycle worth Php40,00 for delivery service
o) Spent Php3,500 for motorcycle repairs and fuel
p) A monthly inventory was made and discovered that Php1,450 worth of supplies was lost due to melting of ice,
rotting of fruits and expirations of some goods
q) A monthly inventory was made and discovered that the cost of goods sold is Php60,000
r) Received total sales worth Php775,000
s) Paid for monthly bills worth Php6,550
t) Other expenses includes:
Salary Php12,500
Taxes Php37,500

The following are the transactions for the month of April (Second Month) 2013:
a) Purchased supplies good for one month worth Php75000
b) Customer with debt paid Php2500
c) Spent Php3000 for repairing of furniture and fixtures.
d) Php2500 worth of insurance was expired
e) Paid the debt on account worth Php2500.
f) Customer ordered worth Php15000 for an annual convention, paid for the half of the amount and promised to pay
the rest.
g) Paid commercial ad for Php5000.
h) Customer paid the Php5000 of his debt.
i) Spent Php2000 for motorcycle repairs and fuel
j) A monthly inventory was made and discovered that Php800 worth of supplies was lost due to melting of ice,
rotting of fruits and expirations of some goods
k) A monthly inventory was made and discovered that the cost of goods sold is Php10000
l) Received total sales worth Php800000
m) Paid for monthly bills worth Php6600
n) Paid dividends for shareholders worth Php50000
o) Other expenses includes:
Salary Php10000
Taxes Php32000

ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 3 of 15
School of Chemical Engineering and Chemistry
Trial Balance
The Bubble Tea House
as of March 2014
Positive Negative
a. Cash (Equity) 700,000.00
Equity 700,000.00
b. Cash (Land) 250,000.00
Land 250,000.00
c. Cash (Tea house) 150,000.00
Tea House 150,000.00
d. Account Payable (Furniture) 75,000.00
Furniture 75,000.00
e. Cash (Supplies) 90,000.00
Supplies 90,000.00
f. Cash (Equipment) 30,000.00
Equipment 30,000.00
g. Account Payable (Supplies) 15,000.00
Supplies 15,000.00
h. Cash (Sales)

35,000.00
Account Receivable (Sales) 7,500.00
i. Cash (Account Payable) 28,500.00
Account Payable 28,500.00
j. Cash (Advertisement) 2,950.00
k. Cash (Account Receivable) 7,000.00
Account Receivable 7,000.00
l. Cash (Insurance) 10,000.00
Insurance 10,000.00
m. Insurance

1,250.00
n. Cash (Motorcycle) 40,000.00
Motorcycle 40,000.00
o. Cash (Motorcycle) 3,500.00
p. Supplies 1,450.00
q. Cash (Cost of Goods Sold) 60,000.00
r. Cash (Sales) 775,000.00
s. Cash (Utilities) 6,550.00
t. Cash (Salary) 12,500.00
Cash (Taxes) sfghhhhhhhhhhhh 37,500.00
TOTAL 2,273,000.00 1,461,200.00
ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 4 of 15
School of Chemical Engineering and Chemistry

Cash Flow Statement
The Bubble Tea House
March 1-31, 2014

Cash from Investments


Equity Php 700,000.00


700,000.00


Cash from transactions


Land (250,000.00)


Tea House (150,000.00)


Supplies (90,000.00)


Equipment (30,000.00)


Sales 35,000.00


Account Payable (28,500.00)


Advertisement (2,950.00)


Account Receivable 7,000.00


Insurance (10,000.00)


Motorcycle (40,000.00)


Motorcycle (3,500.00)


Cost of Good Sold 60,000.00


Sales 775,000.00


Utilities (6,550.00)


Salary (12,500.00)


Taxes (37,500.00)


215,500.00

TOTAL

915,500.00
Beginning Cash

-------
Ending Cash

915,500.00











ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 5 of 15
School of Chemical Engineering and Chemistry
Income Statement
The Bubble Tea House
March 1-31, 2014

Revenues


Sales Php 35,000.00


Sales 7,500.00


Cost of Goods Sold 60,000.00


Sales 775,000.00


877,500.00

Expenses


Advertisement 2,950.00


Insurance 1,250.00


Motorcycle 3,500.00


Supplies 1,450.00


Utilities 6,550.00


Salary 12,500.00


Taxes 37,500.00


65,700.00

INCOME

811,800.00












ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 6 of 15
School of Chemical Engineering and Chemistry
Statement Of Retained Earnings
The Bubble Tea House
March 1-31, 2014


Income Php 811,800.00


Dividends -------


Retained Earnings

811,800.00


Initial Retained Earmings

-------


FINAL RETAINED
EARNINGS


811,800.00



















ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 7 of 15
School of Chemical Engineering and Chemistry
Balance Sheet
The Bubble Tea House
As of March 2014

Assets
Current Assets


Cash Php 915,500.00


Supplies 90,000.00


15,000.00


(1,450.00)


Account Receivable 7,500.00


(7,000.00)


Prepaid Insurance 10,000.00


(1,250.00)


1,028,300.00

Fixed Assets


Land 250,000.00


Tea House 150,000.00


Furniture 75,000.00


Equipment 30,000.00


Motorcycle 40,000.00


545,000.00

TOTAL ASSETS

1,573,300.00

Liabilities & Equity
Current Liabilities


Account Payable 75,000.00


15,000.00


(28,500.00)


61,500.00

Equity


Capital Stock 700,000.00


Retained Earnings 811,800.00


1,511,800.00
TOTAL
LIABILITIES &
EQUITY

1,573,300.00


ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 8 of 15
School of Chemical Engineering and Chemistry
Trial Balance
The Bubble Tea House
as of March 2014

Positive Negative
a. Cash (supplies)

75,000.00
Supplies 75,000.00

b. Cash (Sales) 2,500.00

Account Receivable

2,500.00
c. Cash (Furniture)

3,000.00
d. Insurance

2,500.00
e. Cash (Account Payable)

2,500.00
Account Payable 2,500.00

f. Cash (Sales) 7,500.00

Acount Receivable (Sales) 7,500.00

g. Cash (Advertisement)

5,000.00
h. Cash (Account Receivable) 5,000.00

Account Receivable

5,000.00
i. Cash (Motorcyclee)

2,000.00
j. Supplies

800.00
k.Cash (Cost of Good Solds) 10,000.00

l. Cash (Sales) 800,000.00

m. Cash (Utilities)

6,600.00
n. Cash (Dividends)

50,000.00
Dividends 50,000.00

0. Cash (Salary)

10,000.00
Cash (Taxes)

32,000.00
TOTAL 960,000.00 196,900.00














ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 9 of 15
School of Chemical Engineering and Chemistry
Cash Flow Statement
The Bubble Tea House
April 1-31, 2014

Cash from Investments


Dividends Php (50,000.00)


(50,000.00)


Cash from transactions


Supplies (75,000.00)


Sales 2,500.00


Furniture (3,000.00)


Account Payable (2,500.00)


Sales 7,500.00


Advertisement (5,000.00)


Account Recievable 5,000.00


Motorcycle (2,000.00)


Cost of Good Sold 10,000.00


Sales 800,000.00


Utilities (6,600.00)


Salary (10,000.00)


Taxes (32,000.00)


688,900.00

TOTAL

638,900.00
Beginning Cash

842,400.00
Ending Cash

1,481,300.00
















ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 10 of 15
School of Chemical Engineering and Chemistry
Income Statement
The Bubble Tea House
April 1-31, 2014

Revenues


Sales Php 7,500.00


Sales 7,500.00


Cost of Goods Sold 10,000.00


Sales 800,000.00


825,000.00

Expenses


Furniture 3,000.00


Insurance 2,500.00


Advertisement 5,000.00


Motorcycle 2,000.00


Supplies 800.00


Utilties 6,600.00


Salary 10,000.00


Taxes 32,000.00


61,900.00

INCOME

763,100.00





















ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 11 of 15
School of Chemical Engineering and Chemistry
Statement of Retained Earnings
The Bubble Tea House
March 1-31, 2014


Income
Php
763,100.00


Dividends

(50,000.00)


Retained Earnings


713,100.00


Initial Retained Earmings


708,150.00


FINAL RETAINED
EARNINGS


1,421,250.00
































ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 12 of 15
School of Chemical Engineering and Chemistry
Balance Sheet
Tealicious
As of March 2013

Assets
Current Assets


Cash Php 1,481,300.00


Supplies 75,000.00


10,000.00


(1,000.00)


75,000.00


(800.00)


Account Recievable 7,500.00


(5,000.00)


7,500.00


(2,500.00)


(5,000.00)


Prepaid Insurance 10,000.00


(2,500.00)


(750.00)


1,648,750.00

Fixed Assets


Land 100,000.00


Tea House 100,000.00


Furniture 50,000.00


Equipments 25,000.00


Motorcycle 30,000.00


305,000.00

TOTAL ASSETS

1,953,750.00

Liabilities & Equity
Current Liabilities


Account Payable 50,000.00


10,000.00


(2,500.00)


(25,000.00)


32,500.00

Equity


Capital Stock 500,000.00

ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 13 of 15
School of Chemical Engineering and Chemistry

Retained Earnings 1,421,250.00


1,921,250.00
TOTAL
LIABILITIES &
EQUITY

1,953,750.00








































ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 14 of 15
School of Chemical Engineering and Chemistry
Financial Ratios
Tealicious
April 2013

Current ratio = current assets

Assets Turnover Ratio = sales

current
liabilities
TOTAL
ASSETS
= 1,648,750.00

= 825,000.00

32,500.00

1,953,750.00
= 50.73

= 0.42

Acid Test Ratio = quick assets

Equity Ratio =
TOTAL
EQUITY

current
liabilities
TOTAL
ASSETS
= 1,483,800.00

= 1,921,250.00

32,500.00

1,953,750.00
= 45.66

= 0.98

Debt-to-Equity Ratio =
TOTAL
LIABILITY
Return on Sales = Net Income

total equity

Sales
= 32,500.00

= 763,100.00

1,921,250.00

825,000.00
= 0.02

= 0.92

Debt-to-Assets Ratio =
TOTAL
LIABILITY
Return on Equity = Net Income

TOTAL
ASSETS
TOTAL
EQUITY
= 32,500.00

= 763,100.00

1,953,750.00

192,125.00
= 0.02 = 3.97

Having a current ratio of 50.73, Tealicious is successful in meeting all of its current obligations. As to compare
with the quick assets which can be readily convertible to cash, the company can quickly pay its obligations
because of its great quick assets to liability ratio.

The shareholders do not have to worry about the debt of the company, for the company can easily pay for its
obligations and does not need to borrow more money, for the debt-to-equity ratio is only 0.02.
Compared to the companys assets, the company is in good terms in going since the debt-to-asset ratio is 0.02
and the company can easily grow bigger.

ENGINEERING ECONOMY

Case Study


Mapua Institute of Technology Page 15 of 15
School of Chemical Engineering and Chemistry
The company is not good in using its assets to generate revenues since the ratio of asset to revenue is only 0.42.
There is low optimal usage and conversion of the assets to sales, thus we should have make necessary actions to
respond. A low equity ratio, 0.98, will produce good results for stockholders as long as the company earns a rate
of return on assets that is greater than the interest rate paid to creditors