V.

FINANCE ASPECT

This chapter shows the cost of the proposed project and the sources of financing.
This also interprets the financial statements, which include statement of
comprehensive income, statement of financial position, statement of partner’s equity
and cash flow statements.

1. GENERAL ASSUMPTIONS

 The maximum annual capacity is 57,970 packs of 100g mushroom

chicharon.
 Annual production will increase 5,000 packs (170 packs x 30 days) or 8.80%
on the second year of operation of mushroom chicharon and 20% annually.
 Depreciation is computed on straight-line basis.
 The company hours will be from 8:00 am - 12:00nn and will resume at
1:00pm - 5:pm.
 Land and building will be rented; the land will be for production/growing
room and the building is for cooking, selling and office. The rent expense of
the building will be allocated 25% for office and sales and 50% for factory.
 The project cost will be as follows:

Happy Mushroom

Project Cost

Schedule

Factory Machineries and Equipment 1 47,723.21

Office Equipment 2 21,959.82

Office Furniture and Fixtures 3 12,187.50

Factory Furniture and Fixtures 4 5,714.29

Sales Equipment 5 28,508.93

Sales Furniture and Fixtures 6 5,401.79

Raw Materials Inventories 7 576,687.50

Office Supplies 8 1,105.36

Factory Supplies 9 52,829.46

Sales Supplies 10 1,234.38

Leasehold Improvements 11 35,892.86

Transportation vehicle 12 180,000.00

Pre-operating Expense 13 72445

Input Tax 14 113,995.13

Total 1,155,685.21

Add: Working Capital 44,314.79

Initial Required Capital 1,200,000.00

 The start of business operation is expected to be six months after the start of
the feasibility study.

PROJECT ACTIVITIES

1. Conduct of Feasibility Study (March - April)

Researchers prepares their proposed business as to its feasibility
in the market.

2. Organization of Partnership (April)

The researchers have decided to operate a business as a
partnership structure wherein the researchers will be considered as
general partners. The formation of the partnership is planned by the
partner in this activity.
3. Registration with concerned agencies (April - May)
It includes filling of formation of partnership and registration of
establishment in DTI, BIR and other government agencies.
4. Setting the location for the business (May)
This period will be for the preparation of the site that will be
used for the operation of the business.

5. Renovation of the building (June)

The stage where the the building being leased will be having
improvements.

6. Acquisition of machines and equipments (June)

This period is for purchasing the machineries, equipment,
furniture and supplies needed for the production.

7. Hiring of key personnels (June - July)

Screening and selecting of applicants who are qualified for the
open position will be made in this period.
 8. Orientation and training of the employees (July)
Applicants who are suited for the position will undergo training
in order to enhance and develop their skills to be more competitive,
productive, efficient and effective in their job and for them to be
familiar in their job responsibility.

9. Purchasing of raw materials (July)

This period is for purchasing the raw materials needed for the
start of the business.

10. Start of operation (August)

This period is the official start of the business operation.

2018
Activities
March April May June July August

1 Conduct of Feasibility Study

2 Organization of Partnership

Registration with Concerned

3
Agencies

Setting the location for the

4
business

5 Renovation of the building

Acquisitions of machines
6
and equipments

7 Hiring of key personnels

Orientation and training of

8
employees

Purchasing of Raw
9
Materials

10 Start of operation

GANTT CHART
2. SPECIFIC ASSUMPTIONS
 Raw materials will be purchased from local suppliers and price of raw
materials and indirect materials is expected to increase by 13.80% on the
second year of operation and 5% annually afterwards.
 Direct raw materials will be restocked every three months. While indirect
raw materials will be replenished monthly direct raw materials end will be
10% of available raw materials.
 There will be no work in process inventory.
 Finished goods at year end will be 10% of of total goods available for sale.
 Direct and indirect labor labor will increase 5% every year
 Factory Overhead expenses are as follows:
1. Electricity Expense - Electricity expense in the first year will be 15,000
monthly and will increase 5% annually due to increase in price. It will be
allocated 20% selling, 25% office and 55% factory.
2. Water Expense- water expense on the first year will be 500 monthly and
will increase 5% annually due to increase in price and 5% annually due
to increase in production. It will be allocated 20% selling, 20% office
and 60% factory.
3. Factory supplies is expected to increase 20% annually due to increase in
production. It will be restocked monthly and will have a 10% ending
balance annually.
4. Repair and Maintenance will be 5% of the cost of transportation vehicle,
leasehold improvement and machinery and equipment. It will increase
3% annually.

3. SPECIFIC ASSUMPTIONS FOR SELLING AND ADMINISTRATIVE

ACCOUNTS
 Sales and purchases are inclusive of Value Added Tax.
 The price of mushroom chicharoon will be based on incremental cost plus
mark up.
 Incremental cost of mushroom chicharon includes Direct Material, Direct
Labor, and Variable and Fixed Overhead Expenses.
 Operating Expense are the following:
 Advertising expense will increase 5% annually.
 Sales Supplies is expected to increase 20% annually due to increase in
production and 5% due to increase in price. It will have a 10% ending
balance annually.
 Office supplies is expected to increase 5% annually and will have a 10%
ending balance annually.
 Internet and telephone expense will be P1099 plan monthly or P131,188
annually.
 Annual Repair and maintenance of the delivery truck will be 5% of its
cost.
 Gasoline will be 20,000 monthly and will increase 10% annually due to
increase in production.