INCOME STATEMENT ASSUMPTIONS

A. Revenue Streams
Revenue unit and capacity. Hobby Academys revenue is projected using
the capacity per session of each workshop categories (i.e. wellness,
dance, music and arts and crafts). For both dance and wellness, a full
capacity is equivalent to 15 persons while for arts and crafts, a full
capacity has 6 persons. On the other hand, for music, a piano session
serves for only one person, two persons for a guitar (and other
instruments) session and three persons for a voice lesson. Additionally, we
projected an 80% capacity for the months of January-March and JuneDecember and 100% capacity for April-May.
Program Discounts. As for our pricing scheme, we shall offer program
discounts for availing class packages and membership package. We
expect an average class package discount of 15% and a membership
package discount of 25%. Furthermore, total revenues related to
workshops (except for music) are projected to be composed of 30% walkin, 50% class package and 20% membership package.
Student and Partner Discounts. Hobby Academy shall also offer student
and partner discounts. A 10% discount shall be given to both students and
enrolees affiliated to partner organizations and companies. Total revenues
are estimated to be composed of 20% students and 30% partner
organizations-affiliated enrolees.
Auxiliary service. To maximize the use of studios and other classrooms,
these areas are available for rent when not used. Studio rental is priced at
Php1000/hour. For months except April-May, we expect that studios shall
be rented out for 30% of the total idle hours. On the other hand, since
during April-May, we expect total operating days packed by sessions fully,
there shall be no studio rental during the said period.
Value-added Tax. The said rates are VAT-inclusive.
B. Cost Structure
Cost of service. Mentors shall be paid on a per-session basis. A mentor for
wellness workshop shall receive a salary of Php2250 per session while a
dance teacher shall receive a salary of Php1750 per session. Arts and
crafts mentor shall be paid Php1200 per session, Php1500 for piano and
voice teacher and Php750 for guitar and other instruments mentor.
Rent. Monthly rental rate is estimated to be at Php365 per square meter of
the total leased area plus 12% VAT.
Utilities. Electricity is expected to be at Php20000 per month while water
consumption charges is estimated to be at Php5000 per month.
Additionally, telecommunication and data charges is projected to be at
Php1599 per month.

Salaries, wages and employee benefits. Wages to be paid for

receptionists and maintenance staff are projected using the prevailing
statutory labour provisions and computational tables for employee
benefits. Minimum wage earners for NCR is Php481 per day. Additionally,
each employee shall receive SSS, PhilHealth, Pag-ibig and COLA.
Depreciation. A straight line depreciation method is employed with the
following useful life: 5 years for leasehold improvements, furniture and
fixtures and major equipment and 2 year for minor equipment.
Promotions. Marketing expense is projected to be at 4% of gross sales for
Year 1 to reflect Hobby Academys marketing efforts to establish itself in
the market.
Supplies. Supplies expense is expected to be at an annual fixed cost of
Php30000.
Repairs and maintenance. Costs related to repairs and maintenance is
expected to be at 2% of the property, plant and equipment.
Miscellaneous expense. Other expenses are projected to be at an annual
fixed cost of Php30000.
Start-up costs. Start-up costs are expected to be at Php100000. This
amount shall cover registration fees, licenses and permits.
Taxes. Local sales taxes is expected to be at 2% of gross sales. On the other
hand, income tax expense is computed using the prevailing income tax
rates in the Philippines.
C. Five-year projection
Sales growth. For Year 2, we expect that sales will increase by 7% to reflect
continuous marketing efforts gearing towards organization and corporate
partners and nearby subdivisions and condominium residents. We expect to
put up an additional branch to be situated within the vicinity of Mandaluyong
or Alabang. This expansion effort is projected to lead in an increase in sale by
75%. For Year 4, 8% increase in sale is expected while for Year 5, a 5%
increase is projected reflecting Philippine year-on-year GDP growth rate.
Inflation rate. Cost figures are increased by 3.2% year-on-year reflecting
the National Capital Regions inflation rate as provided by National Statistical
Coordination Board.