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Chapter I

BACKGROUND OF THE STUDY

This chapter discusses the background of the study, its objectives and the

scope and limitation.

Introduction

Food and beverage is very essential to man’s life. It enables him to

survive and maintain life. Aside from that, food and beverage also helps man to

produce energy and stimulate growth. Being one of the basic needs of human

being, food and beverage has become an industry. Many entrepreneurs see

business opportunities with food and beverage. One of these is the

establishment of coffeehouses around the globe.

Coffee is a brewed drink prepared from roasted seeds, called coffee

beans, of the coffee plant. Due to its caffeine content, coffee often has a

stimulating effect on humans. In addition to that, it gives several health benefits

to coffee drinkers. Some of these are, drinking coffee cuts down the risk of liver

cancer by almost half. Antioxidants in coffee are beneficial for many ailments like

Alzheimer, Parkinson and type2 diabetes. Caffeine content in coffee acts by

stimulating the brain and nervous system. It improves alertness and mental

activity. Some people drink coffee to treat headaches and improve concentration.

Some studies claim that antioxidants in coffee decrease the tendency to develop

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depression. Drinking coffee also reduces the risk of gallstone disease and

prevents stroke. Coffee also helps the liver improve its performance; it prevents

the cirrhosis of the liver. Coffee is also beneficial for dealing with heartburn and

osteoporosis. Coffee has been one of the most popular beverages next to water

and tea. Many people had developed a habit of drinking coffee thus various

coffeehouses had existed. Majority of coffeehouses that exist today do have a

contemporary-styled ambiance which helps create youthful, modern, outward-

looking place. As the name suggests, coffeehouses focus on

providing coffee and tea as well as light snacks. Usually, pastries such as cakes

and cookies are being served alongside with coffee. The sweet taste of cakes

and cookies complements the strong flavor of coffee.

Though most coffeehouses or cafes served cakes and cookies which are

a bit costly, the proponents came up with the idea of instead having such;

doughnuts can be served with coffee. Doughnut is a comfort food that is good for

everyone because it relieve stress and makes you feel good. Doughnut is a food

rich in carbohydrates that can increase energy.

Due to the price constraints, some coffee lovers can’t afford to drink coffee

from cafes. That’s why instead of putting up a restaurant-like café, the

proponents consider having the food cart type store. With this, the proponents

can be able to provide their target market with aromatic coffee drinks and tasty

doughnuts in an affordable price that will satisfy their cravings.

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Brief Background of the Study

The establishment of coffeehouses can be traced back in Turkey where

coffee was such an important item during that period. Turkish coffee was served

strong, black and unfiltered. The idea of doctoring up one's coffee with cream

and sweeteners came into fashion in Europe around 1529, when the first coffee

house in Europe was established. Coffee establishments continue to spread and

its popularity grows. The main reason people went to coffeehouses during early

times was to conduct business meetings. Due to its popularity, many individual

developed a habit of drinking coffee thus more coffeehouses existed. They did

not only serve coffee, there are a few who also offered dinner menu.

Nowadays, most coffee chains serve cakes and cookies along with their

coffees. On the contrary, not all coffee drinkers can afford to take a sip at these

cozy coffeehouses because of high prices of their coffees. That’s where the

proponents get the idea of establishing a food cart type of store so that they can

provide the target customers with an affordable aromatic coffee and a flavorful

snack, doughnut.

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Objectives of the Study

The primary objective of this study is to determine the feasibility of

Production and Establishment of Coffee and Doughnuts corner at Batangas

State University – ARASOF Nasugbu, Batangas.

The specific objectives of the study are the following:

1. To put up a food cart type store for coffee and doughnuts at the

BatStateU ARASOF.

2. To improve the quality of coffee and doughnuts being offered.

3. To have an established name in the local market.

Definition of Terms

Coffee and Doughnuts corner. It is a food cart/stall that offers coffee and

doughnuts.

Coffeehouse. It is an establishment which primarily serves prepared coffee or

other hot beverages.

Compensation. It is a salary or wages that the employer pay to the employee for

the work they perform.

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Concoct. It is the act of making something by combining ingredients, to invent or

to devise mixed beverage.

Costly. It is costing a lot of money, or costing too much money; expensive.

Depreciation. It refers to a fall of value, especially of an asset through wear and

tear; an allowance for this deducted from gross profit.

Entrepreneur. It refers to a person who has possession of a new enterprise,

venture or idea and is accountable for the inherent risks and the outcome.

Espresso. It is a strong coffee brewed by forcing steam under pressure through

darkly roasted, powdered coffee beans.

Food cart type store. It is a type of store that is set up in one place to facilitate the

sale and marketing of one product.

Miscellaneous. Costs that are grouped tofether on a balance sheet because of a

lower monetary value.

Pastry. It is baked goods such as pies, tarts, or turnovers, made with paste of

flour, water, and shortening.

Satisfy. It is the feeling of a customer who has got what he wanted.

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Scope and Limitation

The study focuses on the production and establishment of coffee and

doughnuts corner. Instead of putting up a restaurant-like café, the proponents

are constructing a food cart type of store wherein coffee and doughnuts will be

available. The proposed business includes both production and marketing of

coffee and doughnuts. The doughnuts that the proponents are producing are

deep-fried ones. Different flavored dips will also be available for the doughnuts.

Customers may choose the dip they wanted and will also provide candy sprinkles

to make it more attractive.

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Chapter II

MARKET STUDY

This chapter deals with the marketing aspect of this study, the Production

and Establishment of Coffee and Doughnuts corner at BatStateU ARASOF.

Objectives

This chapter aims:

1. To identify the target customer, target market area and market share.

2. To gather more market information needed for marketing analysis.

3. To determine if there is a demand for the product the proponents are

offering.

4. To develop the marketing programs and strategy to be used in

promoting the products.

Research Method

The proponents used the descriptive method in gathering data for the

study.

Participants of the Study

The respondents of the survey were students from BatStateU-ARASOF

Nasugbu, Batangas who are also the target market of this study.

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Data Gathering Instrument

This study used survey as primary instrument in gathering data from the

target market. The survey was conducted to know the perception towards the

product. Interview is used to support the survey done. Please see Appendix A.

Data Gathering Procedure

The permission from the Associate Dean for the approval of the feasibility

study title was sought before conducting the study. In order to get the necessary

data needed in the study, the proponents conducted a survey to the target

customer. The proponents first got the total number of population of the target

customer. The proponents wrote a letter to the University Registrar to get the

total number of student enrolled at BatStateU ARASOF Nasugbu during the A.Y.

2010-2011. They used the Rule of Thumb Method by John Curry for them to

determine the sample size that will be used in the survey. The proponents also

prepared a survey questionnaire. The survey questionnaire made was checked

by the adviser. The survey questionnaire was distributed to the respondents and

had it answered by them. Interview was also done to support the data gathered.

After the respondents answered the survey questionnaire, the proponents

collected it and interpreted the data gathered that was used in the study.

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Statistical Treatment of Data

The statistical process utilized in dealing with the data gathered is the

percentage method. The formula is presented as:

PERCENTAGE = _________Frequency_______ Total number of respondents

In getting the sample size of the total population, the Rule of Thumb

Method by Dr. John Curry was used. An adequate sample of 3,891 students

enrolled at BatStateU ARASOF for A.Y. 2010-2011 would be a random sample of

5% or 195 students. The table for Rule of Thumb Method is shown in Table 2.1.

Table 2.1 Rule of Thumb Method

Size of Population Sampling Percent

0-100 100%

101-1000 10%

1001-5000 5%

5001-10000 3%

10000+ 1%

Major Consumers of the Product

The major consumers of the product were the students of Batangas State

University – ARASOF Nasugbu, Batangas.

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Demand

The following data were gathered based on the survey done:

95%

5%

Respondents who are will-ing to patronize Coffee and Doughnuts corner

Respondents who are not willing to patronize Coffee and Doughnuts corner

Figure 2.1 Willingness of the Respondents in patronizing the Coffee and

Doughnuts Corner

185 respondents answered they are willing to patronize the coffee

and doughnuts corner.

10 respondents answered they are not willing to patronize the

coffee and doughnuts corner.

Based on the result of the survey conducted, there is a high demand for

the coffee and doughnuts corner in the target market. Because of this, the

proponents saw that there will be customers who are going to patronize the said

business. The proponents also found out that the target customers liked the idea

of drinking their coffee with doughnuts.

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Supply

From the survey conducted by the proponents, it was realize that small

number of competitors exist in the target place thus only few are offering coffee

and doughnuts inside BatStateU ARASOF Nasugbu.

56%

22%

22%Canteen (doughnuts)

Canteen (coffee)

other stores inside the campus (coffee)

Figure 2.2 Available Supplies of Coffee and Doughnuts

Market Gap

5%

95%

SupplyMarket gap

Figure 2.3 Market Gap for Coffee and Doughnuts

The market gap analysis as shown in Figure 2.3 illustrates the unsupplied

demand in the target market.

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Market Share

The figure below illustrates the market share for coffee and doughnuts

corner.

4% 5%

89%

2%

Market Share

CanteenBite 'n SipUnsupplied Market Gapothers

Figure 2.4 Market Share for Bite n Sip

As presented in Figure 2.4, the proposed business gathered 5% of the

market share because it can provide unsupplied market in the

SWOT Analysis

SWOT Analysis is another strategic planning method that can was used to

evaluate the Strengths, Weaknesses, Opportunities and Threats of a business.

For this study, offering coffee and doughnuts with an affordable price is one of its

strengths. Moreover, the students and the employees of BatStateU ARASOF

drink coffee. With these, the proponents choose to establish the proposed

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business inside the university. However, being a newly established one, the

business may not be patronized because it is not well known.

On the other hand, having few competitors inside the campus, the

business has the opportunity to have more customers. In addition, the Coffee

and Doughnuts food cart/stall is the first inside the university thus the target

customers can be attracted to buy the proposed business’ products. Because

only few offer coffee and doughnuts inside the university, there is a good chance

that the target customers will patronize the food stall/cart. Though only few

competitors exist in the target place, these competitors do have a well

established reputation in the business and that can be a threat to the business.

Since the store is a food cart/stall type, it would be quite difficult for the

proponents to deal with unexpected weather conditions such as heavy rain and

flood.

Marketing Strategies

The following are the marketing strategies used in the study:

1. Product Strategy

Doughnuts and Coffee is the main product of this food stall.

Different flavored dips are also available for the doughnuts. Customers

are free to choose the dips they want and they can also choose the

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toppings for their doughnuts. In addition to that, different coffee

preparations like hot, iced and blended is also available in the

proponents’ stall. (See Table 2.2 and 2.3 for the menu list).

2. Place Strategy

The food cart or food stall will be located inside the Batangas State

University – ARASOF Nasugbu, Batangas.

3. Promotion Strategy

The proponents will administer several promotional activities so that

target customers will know that “Bite n Sip” already exists. Posters will be

placed around the campus and flyers will be distributed to the target

customers. The proponents will also give some promos such as free

tasting to the customers. Furthermore, for every purchase of a large size

blended coffee, customer will have a free doughnut. The promo will only

last for one week on its opening week. Word-of-mouth will be also

considered as one of the promotional strategies since it has become one

of the effective ways of getting a business known.

4. Price Strategy

Bite ‘n Sip formulated the prices based on the costing done by the

proponents. The doughnut’s price is Php 10.00 each and for the mini

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bite size is Php 5.00 each. The coffee’s price ranged from Php 25.00 –

Php 55.00 depending on the kind of coffee that the customer will order.

Table 2.2 Menu List for Coffee Beverages

Table 2.3 List of Doughnut Flavors

Product List Size and Price

Hot Coffee Small MediumBlack Coffee Php 30.00 Php 35.00Cappuccino Php 28.00 Php 30.00Moccaccino Php 30.00 Php 35.00

Iced Coffee Medium LargeMocha Igloo Php 30.00 Php 40.00

Caramel Igloo Php 35.00 Php 40.00Coffeemilk Igloo Php 30.00 Php 35.00Strawberry Igloo Php 30.00 Php 35.00

Blended Coffee Medium LargeStrawberry Ice Storm Php 45.00 Php 55.00

Cookie Ice Storm Php 45.00 Php 50.00Mallow Ice Storm Php 40.00 Php 45.00

Caramel Ice Storm Php 45.00 Php 50.00Chocolate Ice Storm Php 40.00 Php 45.00

Doughnut’s Flavor Size and PriceDip Flavors Doughnut Mini BitesChocolate Php 9.00 Php 5.00Strawberry Php 9.00 Php 5.00

Milk Php 9.00 Php 5.00Caramel Php 9.00 Php 5.00Mocha Php 9.00 Php 5.00

Add-OnsCandy Sprinkles Php 1.00 Php 1.00

Nuts Php 1.00 Php 1.00Mallows Php 1.00 Php 1.00Cookies Php 1.00 Php 1.00

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Chapter III

TECHNICAL STUDY

This study explains the technical aspects of the proposed business which

includes the description of production process, production schedule as well as

the machineries and equipments needed in the production.

Objectives

This chapter aims:

1. To give the technical description of the product.

2. To describe the process of production and the business process

flow.

3. To determine how the product could be produced at a highest

possible quality level with minimum cost.

4. To identify the equipment, tools and devices that will be utilized in

the production process.

5. To present/develop the design of the food cart.

Description of the Product

The main products of the business are coffee and doughnuts. The

proponents will offer coffee based beverages. There will be a variety of coffee

blended drinks that the customers are free to choose from. Espresso will be used

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as the main ingredient for the coffee blends. Aside from ice cold coffee, hot

coffees are also available in the food stall/cart. On the other hand, doughnuts are

deep fried flour mixture and they are served with different flavored dips and

sprinkles. Coffee and doughnuts can be a perfect pair for breakfast or snack.

Description of Production Process

The flow chart below presents the production process.

Figure 3.1 Flow Chart for the Production of Doughnuts

START

Preparing of Ingredients

Dissolving of yeast

Combining of ingredients

Kneading of dough

Fermenting of yeast

Cutting of dough

Frying of doughnuts

END

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The ingredients (milk, sugar, salt, egg, melted butter, vanilla, cake flour, all

purpose flour and the baking powder) will be first prepared and then dissolve the

yeast and sugar in half of the milk, set aside. In a bowl, combine all purpose flour

and cake flour to make the flour mixture needed. In a separate bowl, mix the

remaining milk, sugar, salt, egg, melted butter, vanilla, half of the flour mixture

and the baking powder. Add the yeast and continue adding the flour until mixture

doesn’t stick the sides of the bowl. Transfer the dough to a working table and

knead, adding in remaining flour for dusting, until smooth and elastic. Place in a

greased bowl and allow rising for 30 minutes - 1 hour or until double in bulk. Roll

out the dough and mold it into circle. Leave to rest until sizes of doughnuts

double. Heat oil in a deep fryer. Fry doughnuts until golden brown. Dust with

sugar or dip with your favorite flavors available at the food stall/cart.

For the production of coffee based beverages, the flowchart on the next

page shows the process to be executed.

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Figure 3.2 Flowchart for Production of Coffee based Beverage

The customer will choose what kind of coffee he/she will buy. There are

two kinds of coffee the customer can choose from, hot or cold. If the customer

prefers to have hot coffee, he/she can choose from black coffee or the flavored

one. For black coffee, espresso will be first made then it is ready to be served

with sugar and creamer. On the other hand, if the customer wants to have a

flavored hot coffee, espresso will also be made first then steamed milk and

START

SELECTION

BLACK COFFEE

HOT COLD

FLAVORED ICED BLENDED

Espresso Making Espresso Making Espresso Making Espresso Making

Serve Pour Steamed Milk PreparePour Milk

END Add Flavor BlendAdd Ice

Add EspressoEND Put in a Glass

END

END

Add Whip Cream

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flavorings will be added. Moreover, if the customer wants to have cold coffee,

he/she can choose between iced and blended coffee. For iced coffee, espresso

will be first made. After that, milk will be poured and flavoring will be added along

with ice and the espresso. If the customer prefers to have blended coffee, while

the espresso is being made, other ingredients such as sugar, milk and flavorings

will be prepared. After the preparations of the ingredients, it will all be blended

together with the espresso. When it is smoothly mixed, pour it in the glass, add

whip cream and toppings.

Production Schedule

The production of doughnuts will be scheduled at four in the morning

(4:00AM) weekdays. The proponents will produce 6 dozens or 72 pieces of

doughnuts per production schedule. While coffee drinks will only be made in the

food cart/stall upon order of the customer.

Machinery and Equipment

In producing and establishing the coffee and doughnuts corner, the

proponents need to use different machinery and equipment.

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NAME QUANTITY PRICE PER UNIT TOTAL AMOUNT

Espresso Maker 2 Php 8,000.00 Php 16,000.00

Blender 2 3,000.00 6,000.00

Deep Fryer 1 6,000.00 6,000.00

Ice Cooler 1 1,900.00 1,900.00

TOTAL: Php 29, 900.00

*Source: www.sulit.com

Factory Tools and Devices

Aside from the equipment that will be used in the production, different

tools will also be needed in the production process.

NAME QUANTITY PRICE AMOUNT

Measuring Cups 1 set Php 178.20 Php 179.00

Mixing Bowl 2 309.15 619.00

Tray 3 139.50 419.00

Weighing Scale 1 500.00 500.00

Tong 2 50.00 50.00

Doughnut cutter 1 160.00 160.00

Kneading Table 1 1,500.00 1,500.00

TOTAL: Php 3, 427.00

*Source: www.sulit.com

Furniture and Fixtures

NAME QUANTITY AMOUNT TOTAL

Table 3.1 List of Machinery and Equipment

Table 3.2 List of Factory Tools and Devices

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Monobloc Chair 1 Php 150.00 Php 150.00

Food Showcase 1 7,500.00 7,500.00

TOTAL: Php 7,650.00

Since the proponents will have a food cart/stall type of store, only few

furniture and fixture will be used. A chair for the storekeeper will be placed in the

store area. In addition, a food showcase will also be positioned in the food

cart/stall. This will serve as storage and display area for doughnuts in order to

maintain its freshness.

*Source: www.sulit.com

Raw Materials

Almost all of the raw materials needed in the production of coffee and

doughnuts are available in the grocery or public markets. The primary ingredient

needed in the production of doughnuts is flour such as All Purpose Flour and

Cake Flour. Others are yeast, sugar, milk, butter, egg, salt, vanilla, baking

powder and oil. For the production of coffee based beverages, the raw materials

to be used are grinded coffee, ice, chocolate sauce, sugar and other flavorings

such as strawberry syrup and caramel syrup. The Raw Materials presented in the

table below are good for 20 days of production.

Table 3.3 List of Furniture and Fixture

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Table 3.4 Raw Materials for Doughnuts and Coffee

Raw Materials Quantity Amount

Cake Flour 1 sack/ 25 kilos Php 1,040.00

All Purpose Flour 1sack/ 25 kilos 1,040.00

Baking Powder 1 bag 65.00

Sugar 1 sack/ 35 kilos 2,100.00

Yeast 1 bag 150.00

Vanilla Extract 2 liters 90.00

Milk 5 liters 325.00

Salt 1 pack 10.00

Egg 1 tray 120.00

Butter 20 bar 440.00

Cooking Oil 1 gallon 500.00

Water 1 gallon 25.00

Chocolate Sauce 1.5 liters 270.00

Condensed Milk 3 cans 105.00

Coffee beans 5 kilos 1,500.00

Strawberry Sauce 1.5 liters 250.00

Caramel Sauce 1.5 liters 270.00

TOTAL Php 8,300.00

Indirect Materials

Indirect materials were also used in order to make the production with the

good service possible. For the production of doughnuts, the proponents used

different toppings to enhance the taste of the doughnuts. The customers are the

ones who will choose the dips they want. Moreover, another indirect material to

Table 3.5 Indirect Material for Coffee and Doughnuts

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be utilized is whipped cream, chocolate sauce and marshmallows which will

serve as the coffee drinks’ toppings.

Indirect Material Quantity Amount

Whipped Cream 5 bottles Php 1,250.00

Mallows 1 bag 45.00

Crushed Cookies 1 bag 55.00

Nuts 1 bag 35.00

Paper Bag 100 pcs. 40.00

Clear Cup and Paper Cup 400 pcs. 1000.00

Lid 200 pcs. 319.00

Straw and Stirrer 200 pcs. 65.00

Sugar and Creamer Sachet 2 packs 210.00

Tissue Paper 1 pack 60.00

TOTAL: Php 3079.00

Office Supplies

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The office supplies that will be needed in the food cart/stall are presented

in the table below.

Table 3.6 List of Office Supplies

NAME QUANTITY AMOUNT TOTAL

Pens 2 Php 5.00 Php 10.00

Record Book 1 53.00 53.00

Folders 2 5.00 10.00

Stapler 1 55.00 55.00

Correction Fluid 1 33.00 33.00

Staple wire 1 box 7.00 7.00

Pentel Pen 2 34.00 68.00

TOTAL: Php 236.00

*Source: www.nationalbookstore

Miscellaneous

The miscellaneous expense of the proposed business includes the

emergency funds for the machinery and other emergency expenses.

Promotion

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The promotional strategies that will be employed are posters and flyers.

Tarpaulins will be printed and it will serve as posters that will be displayed in

some visible areas in the campus. Flyers will also be produced in small sizes of

papers and will be given to that target customers. This is one of the ways the

proponents can inform their target customer that the product already exists.

Aside from that, the proponents will also conduct promos which will only last for

one week. This is upon the opening of the food cart/stall.

Refer to Appendix K and L for sample poster and flyers.

Plant Layout and Plant Location

For the plant layout, refer to Appendices B, C, D, E, F, G, H, and I. The

food cart/stall will be located inside the BatStateU ARASOF campus. The

proponents choose to have the food cart/stall placed at Mini Forest Park because

many students spend their vacant periods in the said area. For the plant location,

refer to Appendix J.

Utilities

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Some of the utilities that will be used in the production are water, LPG,

and electricity. Water will be used in cleaning the equipment as well as the tools

and devices needed in the production. It will also be used as one of the materials

in the production. Another is LPG which will be used in frying the doughnuts.

Electricity will also be utilized. It will be used so that the equipment can function

well.

Waste Disposal

In view of the fact that the proponents are establishing the coffee and

doughnuts corner inside the BatStateU ARASOF, it is important that it complies

with the university’s requirement in terms of proper waste disposal. The

proponents will provide two trash bins beside the food cart/stall this is to avoid

littering of the cups and containers that are used by the customers. In addition to

that, the proponents plan to recycle the plastic waste by selling it to a junk shop.

Direct Labor Requirements

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Aside from the raw materials and indirect materials that will be utilized,

direct labor will also be necessary. The proponents will employ a staff that will

help them in running the business. The store keeper will be the one in-charge of

attending to the customers and will also be trained in concocting different kinds of

coffee beverages. The proponents will also train another staff in order to help

them in the production of doughnuts.

Chapter IV

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MANAGEMENT STUDY

This chapter discusses the management aspect of the proposed business.

Objectives of the Study

General Objective

This chapter aims to develop a clear and precise identification of duties

and responsibilities among the staff. It also tackles the flow of authority and

manpower requirement.

Specific Objectives

This chapter aims:

To identify and discuss the form of business ownership.

To determine the organization structure and benefits to be given to the

staff.

To identify the duties and responsibilities of each member and personnel.

To set organizational policies in order to have a harmonious working

environment.

Form of Business Operation

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The proponents prefer to have a partnership form of business. Partnership

is deemed as an advantageous form for the proponents mainly because it is very

much easy to establish. In addition to that, the capacity to raise fund for the

proposed business is increased because partners can contribute more funds.

The proponents can also combine their skills in order to have a wider pool of

knowledge needed in the proposed business. With partnership, the proponents

can have moral support for each other since they are business partners and it will

allow a healthier brainstorming.

Organizational Structure

Figure 4.1 Organizational Chart

The figure above shows the organizational structure of the business. It

also shows the relative ranks and position in the business. Since the proposed

business is a small one, there is no need of hiring more staff. For the smooth flow

Manager

Storekeeper Production Staff

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of the production process, the proponents will act as general manager,

production manager and store manager.

Manpower Requirement

The proposed business requires a manager, storekeeper and production

staff.

Position Title: MANAGER

Job Description

1. Responsible for the management and operation of the store.

2. Maintaining an active customer service.

3. Preparing and reviewing the financial statements.

4. Checking the sales and inventory of supplies daily.

5. Planning of strategies needed to improve the business.

Job Specification

1. Must have knowledge in business operation and management.

2. Strong effective communicator.

3. Demonstrates ability to manage and supervise a staff team.

4. Demonstrates ability to share skills and knowledge with others.

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5. Willing to multi-task.

Position Title: STOREKEEPER

Job Description

1. Attends to the needs of the customers.

2. Prepares coffee drinks and other beverages.

3. Maintains the cleanliness and orderliness in the store area.

4. Handles the everyday sales and profit.

5. Makes a daily sales report and inventory of supplies.

Job Specification

1. With knowledge on established material handling procedures.

2. With knowledge on inventory control procedures.

3. With knowledge of the operation, adjustment, and maintenance of the

equipment operated.

4. Has the ability to operate machines and related equipment to produce the

desired results.

5. Has the ability to perform simple arithmetic calculations.

6. Has the ability to follow instructions.

7. Has the ability to write legibly.

8. Has the ability to communicate effectively with others.

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Position Title: PRODUCTION MANAGER

Job Description

1. Helps the proponents in the production of doughnuts.

2. Maintains the cleanliness and orderliness in the production site.

Job Specification

1. Has the ability to follow instructions.

2. Knowledgeable with the basics of baking.

Compensation

The proponents will compensate the staff/employee depending on the

scope of the duties. The store manager and the production staff will be given Php

15.00 per hour each daily. For the general manager, he will be given Php 200.00

per business day. The salary of the staff will be given every 15th day and the last

day of the month.

Benefits

Since the proposed business is small and a newly established one, only

few benefits will be given to the staff. Each staff, specifically the store manager

and production manager will have a free meal during the time of their duty. The

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store manager will have a free lunch while the production staff will have a free

breakfast. In the event that the proposed business expands, the proponents will

have the ability to compensate the staff more. They will give back to their

employees in terms of awarding them with more benefits.

Organizational Policies

Like any other business establishments, the proponents constructed the

following rules and regulations to be followed by the staff and employee.

General Policies

1. Every employee shall report to the work on time and should

leave the work place at the proper time of dismissal.

2. Absence without official leave is not allowed by the authority.

Employees should inform the Management about their absence a day

before he/she leaves.

3. If the employee is absent for any apparent reason, the employee

will not be compensated.

4. Every employee shall observe the wearing of proper working

clothes and shall be properly groomed.

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5. Since the business is located inside the BatStateU ARASOF

campus, the storekeeper shall also observe the proper dress code

imposed by the University.

Administrative Policies

1. Every employee shall perform the duties and responsibilities

efficiently and effectively.

2. Every employee shall keep in mind that he/she represents the

business’ name.

3. If any of the equipment got damaged due to the staff’s

recklessness, the staff will be liable for the said damages.

4. In case there will be loss in sales; the storekeeper will be liable

for the said loss. But, in case the sales exceed the actual amount it will be

given automatically to the storekeeper.

Operational Policies

1. Satisfactory performance shall be observed in the workplace.

2. Every employee shall work 8 (eight) hours daily, from 8am to

5pm. In the case of the production staff, he/she will work at the time of the

production only.

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3. Every employee shall use mobile phones and other electronic

communications and media devices properly and discreetly.

3. The store and production manager shall wear apron and hair net

while performing their duties.

Legal Requirements

Before the establishment of the proposed business, the proponents need

to furnish the following legal requirements in order to start the business

operations:

1. Municipal License

2. Regulatory Fees

Mayor’s Permit

CTC/Cedula

Police Clearance

DTI Registration

BIR Registration

Sanitation

Fire Permit

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Generalization

The proponents decided to have a partnership form of business wherein

they will contribute an equal amount of money that will be used in the

establishment of the business. Moreover, the said form of business will allow

them to share their ideas and come up with better and sound decisions. This

chapter also includes the compensation and benefits that will be given to the staff

as well as the duties and responsibilities of each of them. In addition to that, the

organizational structure of the proposed business is also presented in this

chapter.

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Chapter V

FINANCIAL STUDY

This chapter discusses the financial aspect of the proposed business, the

total project cost and financial assumption for the first five years of operation.

This chapter will conclude if the proposed business is profitable or not.

Objectives of the Study

1. To determine the total project cost of the proposed business.

2. To identify the source of financing and the capital requirements that will

be utilized in the proposed business.

3. To illustrate the financial statements and financial assumptions of the

business for the first five years of operation.

4. To analyze the financial ratios of the proposed business.

Total Project Cost

The total project cost of the proposed business is presented on the next

page. It includes all the necessary components in order to complete the business

operation.

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Table 5.1 Project Cost of Bite ‘n Sip

Bite 'n SipProject Cost

           

Fees and Licenses      Php

3,041.00

Equipments          

Coffee machinePhp

16,000.00      

Blender   6,000.0

0      

Deep fryer   6,000.0

0      

Ice cooler   1,900.0

0     29,900.0

0

Food Cart         7,460.0

0 Furniture and Fixtures          

ChairPhp

150.00      

Food showcase   7,500.0

0     7,650.0

0 Working Capital          

MaterialsPhp

110,752.82      

Traveling   2,160.0

0      

Advertising   750.0

0      

Utilities   480.0

0      

Office supplies   870.0

0       Tools and devices  

1,427.00      

Wages   9,000.0

0      

Miscellaneous   360.0

0     125,799.8

2

Total Project Cost      Ph

p 173,850.8

2

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The table above shows the total project cost of the proposed business.

The working capital presented above includes all the expenses that will be

incurred in the first month of operation.

Capital Requirements

The overall capital requirement needed for the proposed business is Php

160,000.00. The mentioned amount is enough to cover all the necessary

expenses needed in the operation of the said business.

Sources of Financing

In order to realize the proposed business, the proponents agreed to

contribute cash amounting to Php 53,333.33 each for a total of Php 160,000.00

as starting capital to establish a business.

Financial Assumptions

41

The assumptions are made by the proponents of the study.

Increase in sales is resulted from the 3% increase in quantity and

unit selling price per year.

Cost of sales, like sales is increased annually.

Expenses such as wages and depreciation remains fixed.

Other expenses such as utilities, travelling and miscellaneous are

increased by 3% annually.

Income tax expense is computed by having 30% based on

income before tax.

Financial Statements

The Financial Statements for the proposed business is presented on the

next pages. The Financial Statements are for the first five years of operations.

For the Financial Statements see page 42.

42

43

44

45

Notes to Financial Statement

1. Statement of Sales. See page 47.

2. Statement of Cost of Sales. See page 48.

3. Expenses

For breakdown of equipment, furniture and fixture see Table 3.1

page 21, and Table 3.3 page 22.

Liabilities are composed of Income Tax Payable which is paid

during on or before 15th day of April of the next year.

The partner’s equity which is increased by a net income that is

shared equally by all of the partners.

Income is composed of sales or computation of sales, see

Figure 5.1 page 41, and is increased by 3% annually in quantity

and unit selling price.

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Expenses are composed of cost of sales see Figure 5.1 page

41, fixed (wages, depreciation and miscellaneous), and variables

(cost of sales, income tax) which is increased by 3% annually.

4. Statement of Inventory. See page 49.

5.Non-current Assets

Non Current Assets 1 2 3 4 5

Equipments 29,900.00 29,900.00 29,900.00 29,900.00 29,900.00 Food Cart 7,460.00 7,460.00 7,460.00 7,460.00 7,460.00 Furniture and Fixtures 7,650.00 7,680.00 7,680.00 7,680.00 7,680.00

Less: Accumulated Depreciation

1,511.00 3,022.00 4,533.00 6,044.00 7,555.00

6. Income Tax Payable

The tax for the first three quarters has been paid and the

remaining quarter will be payable on April 15 next year.

7. Statement of Changes in Partner’s Equity. See page 50.

8. Production Cost. See page 51.

47

48

49

50

51

52

53

54

55

Ratios

Financial Ratios

A. Profitability Ratio

Profitability ratio shows the combined effects of liquidity, asset

management, and debt on operating results.

Table 5.2 Return on Investment

Year Net Income InvestmentReturn on

Investment1 128,581.26 160,000.00 80%2 139,213.79 160,000.00 87%3 149,446.07 160,000.00 93%4 160,313.82 160,000.00 100%5 171,856.11 160,000.00 107%

Table 5.2 Return on Investment refers to the percentage of income

that serves recovery from the original investment. On the first year, there

is 80% return on the partner’s investments and there is a gradual increase

in the succeeding year. This is an implication that the partner receives

56

such percentage as a return to the investment contributed. To show the

computation of the present value, please see Appendix N.

B. Profit Margin Ratio

Profit Margin ratio measures net income per peso of sales, it

is computed by dividing net income by sales.

Table 5.3 Profit Margin Ratio

Year Net Income Sales Profit Margin Ratio1 128,581.26 767,081.00 16.76 : 1

2 139,213.79 813,796.23 17.11 : 1

3 149,446.07 863,356.42 17.31 : 1

4 160,313.82 915,934.83 17.50 : 1

5 171,856.11 971,715.26 17.69 : 1

Table5.3 Profit Margin Ratio refers to the ratio of net income for

every peso of sale. For year 1, in every peso of sale 16.76% of it is its net

income.

C. Liquidity Ratio

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Liquidity ratio shows the relationship of a firm’s cash and other

current assets to its current liability.

Table 5.4 Current Ratio

Year Current Assets Current Liabilities Current/Quick Ratio

1 258,858.83 13,776.56 18.78 : 1

2 400,692.81 14,915.76 26.86 :1

3 552,746.20 16,012.08 34.52 : 1

4 715,735.42 17,176.48 41.66 : 1

5 890,339.20 18,413.15 48.35 : 1

Table 5.4 Current Ratio refers to how much peso of current assets is to be

paid for any peso of current liabilities. The table above shows that the

proposed business is capable of paying its short term debts.

D. Stability Ratio

Stability ratio proves that the business is stable by finding the debt

to equity ratio; it is computed by dividing the total liabilities to total partners’

equity.

Table 5.5 Debt to Equity Ratio

Year Total Liabilities Total Partner’s Equity

Debt to Equity Ratio

1 13,776.56 288,581.26 4.77: 12 14,915.76 427,795.05 3.49 : 13 16,012.08 577,241.12 2.77 : 1

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4 17,176.48 737,554.94 2.33 : 15 18,413.15 909,411.05 2.02 : 1

Table 5.5 Debt to Equity Ratio of the proposed business as

presented on the previous page shows that the business is a stable one and has

the ability to pay its long term debt.

Generalization

The proposed business has a total project cost of Php 173, 850.82. The

proponents agreed to contribute Php 53,333.33 each; the said amount will be

used as the capital for establishing the said business. In this chapter, the

Financial Statements for the first five years of the business is also presented.

Furthermore, financial ratios are also discussed and interpreted.

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Chapter VI

Socio Economic Contributions

This chapter discusses the social desirability of the proposed business

and its contribution to the nation’s economy.

Contribution to Nation’s Economy

The proposed business can contribute in the nation’s economy in several

ways. One of these is, as a producer of coffee and doughnuts, the proposed

business needs to buy raw materials from suppliers thus it also helps other

business in gaining profits. Another is it makes available of the products to their

customers which they need in a more affordable price. The proposed business

also employs workers who can help them in the business. In that way they are

able to give work opportunity to those who are unemployed. By establishing the

business it becomes subject to several taxes which goes to the government and

being utilize for construction of different infrastructures.

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Employment Generation

The proposed business will employ two staff who will help the proponents

in the operation of the business. Since it is a newly established business the

proponents will not employ a huge number of employees. But as soon as the

business grows and the proponents plan to expand the business, there will be a

need for more employees. Thus the proponents will hire additional staff. In that

way, the proposed business can somehow help in reducing the unemployment

rate in the community where the business is located.

Social Desirability

The proposed business is socially desirable to the government, the

customer and to its employees. With the taxes that the business will pay, the

government will use the said funds in building infrastructure that will benefit the

citizens. By establishing the proposed business, the proponents will be able to

provide the target customers with products that will satisfy them. On the other

hand, the employees that the proponents will employ will be compensated

properly and will be given benefits that can somehow help them improve their

way of living.

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Other Contribution

Aside from the business’ contribution to the economy and its social

desirability it can also contribute in other ways. The proposed business can

contribute to the community where it is located by making the products available

to its customers and it provides them with a wide selection of food to choose

from. In addition to that, the business can also contribute in the environment by

disposing the waste materials properly. The business will also promote the said

environmental awareness to its target customers.