Professional Documents
Culture Documents
2
Income Tax ........................................................................... 110
X. FINANCING ASPECT .......................................................................... 111
Source of Financing .............................................................. 111
Project Cost .......................................................................... 112
XI. FINANCIAL ASPECT ........................................................................... 119
FINANCIAL ASSUMPTIONS ........................................................ 119
FINANCIAL STATEMENT ANALYSIS ........................................... 159
XII. SOCIO/ECONOMIC DESIRABILITY .................................................... 177
Government .......................................................................... 177
Farmers ................................................................................ 177
Target Market ....................................................................... 178
Environment ......................................................................... 178
Community ........................................................................... 179
Philippine economy ............................................................... 179
Global economy .................................................................... 179
Coffee Industry ..................................................................... 180
Ecology ................................................................................. 180
Coffee Consumers ................................................................ 181
Competitors .......................................................................... 181
XIII. STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS
ANALYSIS ........................................................................................... 184
SWOT MATRIX............................................................................. 185
STRENGTHS ............................................................................... 186
WEAKNESSES............................................................................. 187
CONVERSION OF WEAKNESS TO STRENGTHS ....................... 187
OPPORTUNITIES ........................................................................ 188
THREATS ..................................................................................... 189
CONVERSION OF THREATS TO OPPORTUNITIES ................... 190
3
LIST OF FIGURES
FIGURE 1PLANTATION FLOW .................................................................................. 23
FIGURE 2. RECOMMENDED PLANTING DISTANCE (3X3 M) ............................ 29
FIGURE 3. VIEW FROM THE MAIN ROAD .............................................................. 46
FIGURE 4. VIEW OF SITE FENCE ............................................................................ 47
FIGURE 5. CHANNEL OF DISTRIBUTION ............................................................... 77
FIGURE 6.PRIMERAPRESKO LOGO ....................................................................... 78
FIGURE 7. PACKAGING FOR PRIMERA PRESKO ............................................... 79
FIGURE 8. SOCIAL MEDIA SITE FOR PRIMERA PRESKO ................................. 81
FIGURE 9. WAREHOUSE FOR STORING BEANS ................................................ 82
FIGURE 10. GANTT CHART PRE-OPERATING ACTIVITIES .............................. 86
FIGURE 11. ORGANIZATIONAL CHART ................................................................. 93
FIGURE 12. SCHEMATIC DIAGRAM ...................................................................... 182
FIGURE 13. SWOT MATRIX ..................................................................................... 186
LIST OF NOTES
NOTE 1 RESEARCH COST ........................................................................ 113
NOTE 2 PERMITS AND LICENSES............................................................ 114
NOTE 3 LAND ............................................................................................. 114
NOTE 4 FARMHOUSE ................................................................................ 114
NOTE 5 OFFICE EQUIPMENT ................................................................... 115
NOTE 6 FARM TOOLS ............................................................................... 116
NOTE 7 FURNITURE AND FIXTURES ....................................................... 116
NOTE 8 RAW MATERIALS ......................................................................... 116
NOTE 9 FREIGHT-IN .................................................................................. 116
NOTE 10 PRODUCTION SUPPLIES ............................................................ 117
NOTE 11 OFFICE SUPPLIES ....................................................................... 117
NOTE 12 UTILITIES ...................................................................................... 118
NOTE 13 CLEANING SUPPLIES .................................................................. 118
NOTE 14 SALARIES AND WAGES .............................................................. 118
NOTE 15 PROFESSIONAL FEES ................................................................ 118
4
LIST OF TABLES
TABLE 1. SUGGESTED SHADE REGULATION ............................................................................... 24
TABLE 2. ARABICA GROWTH REQUIREMENTS ............................................................................ 25
TABLE 3. ANNUAL PRODUCTION CAPACITY ................................................................................. 39
TABLE 4. GUIDE IN THE EVALUATION PROCESS ........................................................................ 41
TABLE 5. COFFEE SHOP POPULATION IN THE PHILIPPINES (2009-2013).............................. 54
TABLE 6. COFFEE VARIETIES FREQUENTLY PURCHASED ....................................................... 56
TABLE 7. COFFEE FORMS FREQUENTLY PURCHASED ............................................................. 57
TABLE 8. PACKAGES PREFERRED BY THE RESPONDENTS .................................................... 58
TABLE 9. RESPONDENT’S MONTHLY DEMAND FOR REGULAR COFFEE .............................. 59
TABLE 10. KNOWLEDGE OF THE ARABICA VARIETY .................................................................. 60
TABLE 11. KNOWLEDGE OF THE SHADE-GROWN MODEL OF GROWING COFFEE ............ 61
TABLE 12. MARKET WILLINGNESS TO PURCHASE ..................................................................... 61
TABLE 13.PHP170 FOR UNROASTED BEANS AS REASONABLE .............................................. 62
TABLE 14.PHP400 FOR ROASTED BEANS AS REASONABLE .................................................... 62
TABLE 15.PHP600 FOR GROUND BEANS AS REASONABLE ..................................................... 63
TABLE 16. DEMAND FOR SHADE-GROWN ARABICA COFFEE .................................................. 64
TABLE 17. TOTAL COFFEE CONSUMED IN THE PHILIPPINES .................................................. 65
TABLE 18. PROJECTED COFFEE FRANCHISE POPULATION .................................................... 65
TABLE 19. PROJECTED ANNUAL DEMAND .................................................................................... 66
TABLE 20. MARKET SUPPLIERS IN CEBU ...................................................................................... 67
TABLE 21. PHILIPPINE LOCAL PRODUCTION................................................................................ 68
TABLE 22. PROJECTED LOCAL PRODUCTION OF COFFEE ...................................................... 68
TABLE 23. PHILIPPINE INTERNATIONAL IMPORTS ...................................................................... 69
TABLE 24. PROJECTED PHILIPPINE INTERNATIONAL IMPORTS OF COFFEE ...................... 70
TABLE 25. PROJECTED SUPPLY OF COFFEE IN THE PHILIPPINES ........................................ 70
TABLE 26. PROJECTED SUPPLY OF COFFEE FOR COFFEE SHOPS IN CEBU ...................... 71
TABLE 27. PROJECTED MARKET SHARE ....................................................................................... 72
TABLE 28. PROJECTED SELLING PRICE ........................................................................................ 74
TABLE 29. PREFERRED TERMS OF SALE ...................................................................................... 75
TABLE 30. WORKING SCHEDULE..................................................................................................... 97
TABLE 31. WAGE RATES OF THE EMPLOYEES ............................................................................ 99
TABLE 32. VIOLATIONS AND SANCTIONS.................................................................................... 102
5
CHAPTER I
INTRODUCTION
the daily intake of the Filipinos, especially among students and those working on
night shift. There would be an endlessdemand for coffee because work and studies
are endless, too. Coffee shops serving diverse types of coffee is becoming the
home of students who wanted to study in a peaceful and friendly ambiance. It has
also been a venue for common social meetings to some businessmen. Coffee
shops are everywhere in the city. More and more entrepreneurs engage
this fact has been widely-debated. Coffee is not the second largest traded
commodity, but it is still a large industry (Newton, 2017),while this is a fact in 1970s,
but is not the case anymore (Baffes, 2017). Domestic consumption of coffee would
climb up to 100,000 tons a year and demand for it is still growing (Philippine Coffee
Board). Coffee covers not only the local market but also the international market
Though some might see the negative effects in consuming coffee and some
would think it as a bad habit to drink coffee, research already proved that there are
several health benefits in coffee (Nurses’ Health Study, 2001). The benefits of
coffee have been researched quite well and somehow it has led to many benefits
6
such as reducing the risk of stroke, type II diabetes, Parkinson’s disease and
certain types of cancers (Veronica Setiawan). Coffee also protects the human body
for it contains antioxidants that serve as body warriors protecting against free
radicals that damage cells within the human body. Students consume coffee
caffeine that increases the adrenaline levels in the human body (Anselme,
With a lot of benefits coming from coffee, the researchers have decided to
profitability. Not only because of the number of health benefits had made the
researchers pursue this study but also because coffee is an important commodity
locally and globally. Coffee being a major export commodity and also one of the
top agricultural exports (FAO Statistics Division) would help the locality to develop
their economy.
Economical purpose and health benefits are the core purposes of this study.
Research had proven its benefits to the human body and statistics have shown
7
STATEMENT OF THE PROBLEM
grown Arabica Coffee and Its Distribution. Specifically, this study answered the
following questions:
1.1 Technical;
1.2 Marketing;
1.3 Management;
1.4 Financing;
1.6 Financial;
proposed project?
The main objective of conducting this study is the eagerness to test its
viability in the market. Data provided in this book is designed to provide different
8
Investors
From the study, the investors can assess if the industry is worth investing.
It will show them the risk and reward, opportunity costs and overall return on their
investment. Investors will have a view on the quantitative or financial side of the
industry. The industry’s financial and quantitative reports are also presented in this
study in which the investors may know how the industry is currently performing
Entrepreneurs
The proposed study provides knowledge to entrepreneurs who want to
engage in the same industry. Through the study, they can assess the probable
outcome of the business they are about to undertake. This will help them
understand the business from the technical down to its financial aspect. It will also
give them the industry’s position in the marketplace, and its financial situation. It
would also include information on its major competitors, primary customers, and
any relevant industry trends. This sort of overview provides entrepreneurs with an
information provided in this study can prove valuable to educate the farmers in the
municipalities that would implement this project. This can be used to develop a
strategic plan to provide livelihood programs for the municipalities’ farmers thus
translating their ideas into measurable goals. This will help their livelihood projects
9
come into a reality and aid them in breaking down their workforce to further create
a series of concrete steps and outline on how the steps can be implemented.
Government agencies
This study would give additional information to the different government
Resources and other agencies that will benefit from the proposed study. This
would provide them statistics like the number of farmers willing to be part of the
production; and thecurrent state of the production or appropriate places that it can
appropriately be planted.
The Researchers
In the process of accomplishing this study, the researchers invested their
time, money, efforts, expertise, knowledge and skills which had greatly improved
expertise and skills, and updating their learnings from the subject taken. This had
the society from the exposure to become more effective, efficient and competent
Future Researchers
This proposal will help future researchers in achieving the completion of
their related studies by enlightening them with new ideas. This will serve as their
guide in making their own studies. They can also use this as the basis as to what
they really want as an output of their study and gives them a clearer understanding
10
of the topics. They can use this book as an additional reference for the completion
of their studies.
RESEARCH DESIGN
The research design refers to a scheme or plan of how the research will be
conducted. The quality of output depends largely upon the research design or
It is used because the objective of the study is to see a general picture of the
population in terms of their social and economic characteristics, opinion, and their
knowledge.
Environment
This study covered the coffee shops located in Metropolitan Cebu,
specifically along Mango Avenue, F. Ramos Street, Ayala Mall, SM City Cebu, N.
Escario Street and IT Park. Mango Avenue, also called General Maxilom Ave.
covers from Mango Square Mall to Mango Park. Ayala Mall is located at Cardinal
Rosales Ave, Cebu City, Cebu. SM City Cebu is located beside Kaohsiung Street.
IT Park is located on Jose Maria del Mar St., Apas, Cebu City
11
Figure 5.1
Map of Environment
Population and Respondents
There are a lot of coffee shops in Cebu but a majority of them are from
franchises. An ocular scan was used to determine coffee shops and skipping over
Coffee shops
Number of Number of
located within a 50-
population (N) respondents (n)
meter radius
2. SM Cebu 2 2
3. Ayala Mall 2 1
4. Escario Street 6 3
5. IT Park 7 6
6. Internet Questionnaire 8 1
Total 33 19
12
The population consists of the large coffee franchises such as Starbuck’s,
Bo’s, and The Coffee Bean & Tea Leaf, as well as smaller independent specialty
coffee shops such as KohiNori and Workplace Cafe, which explained the large
use for gathering data. It will only require the respondent’s small amount of time to
answer the questions. The respondents were given choices of answer, which
Another instrument used to gather information was the interviews with some
managers. So far, two managers have been interviewed and their input had greatly
population were likewise utilized. Reliable sources include the Philippine Statistics
local news.
Research Procedure
The following are the statistical technique used in treating the data in depth
13
of every coffee shop. Respondents that abstained were excluded from the
apply this formula which are on questions that determine the demand for
coffee in general and on the demand for the shade-grown Arabica coffee.
FORMULA:
µ=ƩFx
n
Ʃ = summation
F = frequency
x = mean
2. Multiple Choice Ranking. Some data have multiple choices and are
not mutually exclusive. These data are arranged by the most popular among
the total number of respondents. The choice which has the highest
shown but not included in the ranking. Respondents that abstained still
appeared in the tabular forms. Questions that use this ranking method
preferred suppliers.
which means that one choice cannot co-exist with the other. These data is
14
arranged and interpreted with whether or not their answer is positive,
the years of 2011 – 2015. These trends are extremely useful in predicting
the projected demand as well as where the current suppliers of coffee come
There are factors that hinder the proponents from obtaining the exact data
Selected Respondents
project. Managers are best suited to answer the survey but if there are no
managers, baristas are given the survey form as baristas have an estimate on the
Confidential Information
15
Respondents reject or deny the request of having a survey because of
Time
is required and must be applied to the total population. Another constraint that the
researchers experienced was that sometimes the manager is not present at the
Sampling Risk
Accessibility of Information
Some reliable sources offer accurate and relevant information but require
large fees. This source offers more reliable information but at a price that
16
DEFINITION OF TERMS
Some terms used in this book connotes different meanings thus they are
defined hereunder:
Commercial polyculture
This is a type of shade where coffee is grown under planted trees. Canopies
are pruned regularly and epiphytes are removed. This involves the use of more
Epiphytes
This is a plant growing on another plant for physical support and do not
negatively affect the host. Examples are mosses and orchids. This is used as an
Full sun
This is a type of shade where there is a lack of tree canopies or one where
Mulch
natural.
Overstory
This is a type of tree with dense foliage and taller reach and shades the
17
Rustic
Shaded monoculture
one or two tree species. Canopies are heavily pruned. Shade level is around 10 –
30%.
Shade-grown Method
This method employs the use of dense overstore trees as shade for the
Sun-grown Method
This method employs the use of artificial fishnets as shade for the coffee
trees.
Traditional polyculture
forest trees and planted trees, including fruits and vegetables. Shade level needed
is around 60 – 90%.
Varieties
This is a rank lower than of species. In this study, examples are the Coffea
18
CHAPTER II
TECHNICAL ASPECT
from what is available in the market. The quality of a product would somehow
depend on its raw materials, machines and equipment used, and also as to how
This chapter states the necessary materials and the equipment and tools
that are to be used in production. It is also discussed in this chapter the plant
location and layout, production capacity, quality control implemented, utilities and
waste management.
PRODUCT DESCRIPTION
The proposed study is about the production and distribution of Arabica
coffee beans to coffee shops located in Cebu City. Arabica coffees, locally known
as “Kapeng Tagalog” are considered to be the best variety of coffee in the countries
This variety is characterized by wavy leaf margins, light green color, and
thin leaf. Its flowers are white and creamy with short pedicels. The berries are
oblong in shape, measuring about 1.5 cm long, green when immature and turns
red or yellow depending on maturity. Arabica yields 500 to 1000 kg of clean dry
coffee beans per hectare. This variety is an early bearer; it bears fruits two to three
19
MATERIALS
These are the necessary inputs used and applied to transform or modify
20
EQUIPMENT AND TOOLS
These are the necessary equipment and tools used in the production
process. They are used by farmers in cultivating and harvesting the crops and are
also used for manufacturing the finished product. The following equipment and
tools should be properly selected to reach the planned quality and also to have a
unit.
21
Coffee roaster. Coffee roaster is a machine that
22
PLANTATION FLOW
One of the vital parts of the technical aspect is the process of things that
should be done in the plantation to ensure the quality of the products. The time
23
Establishment of the Coffee Plantation
First thing to do in establishing the coffee plantation, is the construction of
2. Sowing of seeds
5. Pricking of seedlings
7. Weeding
considered.
24
Table 2. Arabica Growth Requirements
NAME OF COFFEE Arabica
SOIL pH 5.5-6.5
Soil Factor
The minimum depth of soil for coffee propagation is 1.5 meters. The
soil must be highly fertile with high moisture holding capacity. It must be of
medium texture with good drainage and erosion. Soil moisture must be
25
Climatic Requirement
berry development.
Land Preparation
establishment of the plantation. The main goal is to free the area from
weeds and one way of doing this is through plowing. The plowing process
not only suppresses weeds but also cultivates the soil and makes it soft. It
Land Elevation
Higher elevations produce hard, dense beans that are more sought-
after than beans grown at lower elevations. Hard beans, as they are
sometimes called, are of a higher quality than soft beans, because they
26
Soil Organic Matter
Soil organic matter (SOM) plays an important role in soil quality and
Rainfall
Sunshine Requirement
The tree requires some but not too much direct sunlight; two hours
a day seems ideal. The lacy leaves of the upper levels of the rainforest
originally shaded the coffee tree. To meet this requirement, the usage of
nets as shade for the coffee trees are necessary for the first three years.
Relative Humidity
moisture content of more than 8 but not less than 12.5 percent, as beans
with this moisture content have the best flavor when roasted. If a storage
facility is too dry or humid, the beans respectively lose or gain moisture,
27
which impacts their flavor. Therefore, the amount of time a company can
store coffee depends on its geographic location. Those with low relative
humidity levels can only store coffee for short periods. Arabica Coffee’s
Shade Regulation
Various studies indicate that arabica coffee has the highest yields
under 35% to 65% shade. In addition, growing coffee under shade also
crop from frost, and helps to increase numbers of pollinators which results
in better fruit set. Coffee grown in the shade takes long to ripen and is
often thought to taste better because the long ripening times contribute to
complex flavors.
It is important to take note of the orientation of rows from west to east or from north
to south that will allow sunlight penetration between the rows, then stake the rows
and hills of coffee. For shade-grown coffee using the commercial polyculture
method, the picture next page signifies the recommended planting distance:
28
Figure 2. Recommended Planting Distance (3x3 m)
Planting holes should be large and deep enough to put up the ball of soil
intact around the roots of the seedlings. It is best to dig holes (40x40x40cm) to
provide room for the root development one month prior to planting. While digging
holes, separate the topsoil from the subsoil. Refill holes by putting back topsoil first
and then overlaying with the subsoil. Add compost and fertilizers rich in
Transplanting
Transplanting of Arabica Coffee seedling should take place at the onset of
consists of six small pairs of leaves or when the seedling is six months old. In
transplanting, thefirst step is to cut the plastic bag one inch from the bottom to take
out bent roots. Then, remove the plastic bag and bury the ball of soil.If white grub
is a problem, mix thoroughly the recommended rates of Furadan to the soil during
planting. Make sure that the root collar is exactly at ground level to prevent rotting
and compact the base around the seedling. Basal fertilization is recommended
using acomplete fertilizer. Apply basal fertilizer two to three tablespoons per
29
Care and Maintenance
This stage is the crucial part of plantation because it greatly affects the
coffee production and quality. Care and maintenance involve weeding and
Weeding is done to reduce the competition of weed and crop for the
moisture losses during dry periods. Mulching enhances soil moisture status
more beneficial than the latter according to Webster and Wilson (1971). The
temperature range. This effect is of minor importance under tree crops with
heavy shade, but even under cocoa Smith (1954) found that mulching
way, the soil is protected against sun and rain. The rotting leaves give the
30
Fertilization
like zinc, boron, copper, manganese, and iron are also vital to the growth of
program is recommended:
Pocket method. Currently, the fertilizer recommended rate (RR) for coffee
200 per hectare plus the needed micronutrients depending on soil analysis.
31
In fertilization, first dig four holes around the coffee plant, each with
a depth of five to six inches and with a distance of one meter from the base
of the plant. Put 100 grams of mixed fertilizers in each hole and cover
immediately. If thesoil is dry, water the covered holes with one liter of water.
flowering, fruit set and development and maturation of the crop. Based on
Pruning
node of all primary branches. Desuckering is then done for the removal of
orthotropic branches arising from the main trunk. Handling on other hand
is the removal of small sprouts arising from the axis of the leaves which
otherwise grow towards the inner side and cause shade and become
32
unproductive wood. Lastly, if growing tips of primary branches appear, it is
The following are the most common and most destructive pests and
diseases of coffee in the Philippines.
A. Pests
There are four kinds of insects that attack the different parts
of the coffee plant. These include the following:
Insects Insects attacking Insects Insects attacking
attacking the the stem or trunk attacking the berries
roots or branches the young
shoots
and
leaves
Name White Root Grubs Mealybugs Black Coffee Berry Borer
Citrus
Aphid
Damages Roots are eaten Presence of white Young Irregular holes in
up with fluffy bodies on shoots with leaves due to
consequent shoots, leaves and aphid thefeeding of adult
wilting of the between berries. calories beetles. Infested
leaves. Plants are stunted curl up and young berries turn
with berries become from the normal
undeveloped. distorted. green to yellow-
Presence of orange and shortly
abundant, sooty afterward, the fruits
molds. fall prematurely.
Name Cricket Pyramid Borer Coffee
Clearing
Moth
Damages Roots are cut-off Leaves turn yellow Irregular
resulting in the and eventually wilt holes or
wilting of newly- due to the boring of portions of
planted beetles inside the leaves
seedlings. trunks and removed,
branches resulting sometimes
to the death of the stripping
tree. the plants
bare.
33
B. Pest Management
In the pest management, there are two methods, the mechanical and
like the collection and destruction of infested berries before and after the
harvest, keeping the plantation free from ripe and overripe berries for a
quarantine laws and avoidance of using sacks that have been used for
minutes or dry with hot air until themoisture content is 22 percent or below
Under the chemical method, pests like coffee berry borer must be
34
C. Diseases and Their Control
Harvesting
Coffee trees do not bear fruits exactly at the same time; some may be late,
while some may bear fruits earlier. Thus, harvesting is normally done by
handpicking the berries when they turned red or yellow. Coffee fruits should be
picked as and when they become ripe to get better quality. This kind of harvesting
is called Selective picking wherein only ripe berries are harvested. It is preferable
to pick hard ripe berries (mature, red berry) and soft ripe (mature, red to dark red,
skin no longer firm) berries for best quality of coffee beans. The berry of normal
size is hard when pinched or bitten at about ½ of its breadth. The berry is said to
35
be mature if there is already a slight yellowing of its upper portion. Arabica comes
for harvesting earlier since they take 8-9 months for fruit development from
flowering.
When harvesting, the berries are picked one by one with three daysinterval
between picking. The first picking consists of selective picking of ripe berries and
is called fly picking. Thereafter, there will be 4-6 main pickings at 10-15 days
intervals and final harvest. Picked berries are placed in a takuyan. A bamboo
Processing
After harvesting, the coffee beans should be processed within 12 hours.
Delaying the pulping operations for more than 48 hours causes the deterioration
coffee beans. This process is considered good and economical because sun
drying produces beans of good taste and color. Drying is composed of several
steps, first is to place the harvested berries on a mat or a tray and sun-dry. Spread
the harvested berries evenly with the aid of a rake or with bare hands. Then, turn
over the mat of coffee berries three or four times a day. Gather the berries in a
heap before sundown and cover them either with buri mat. Finally, remove the
cover and expose the berries again to sunlight the following day. These steps are
followed for several days until the moisture content is reduced to about 12 percent.
The drying process lasts two weeks for Arabica. After the whole process of drying
the berries are now ready for hulling. Hulling machinery removes the parchment
36
layer (endocarp) from wet-processed coffee. Hulling dry processed coffee refers
to removing the entire dried husk — the exocarp, mesocarp, and endocarp — of
the dried cherries. This process must be done carefully because improper
adjustment of the hulling machine may result in the unnecessary breakage of the
beans and incomplete removal of the parchment. Polishing is also done while
hulling. Polishing is an optional process where any silver skin that remains on the
superior to unpolished ones. After polishing, the beans will be now sorted
according to their quality. It is done by size and weight, and beans are also
reviewed for color flaws or other imperfections. Typically, the bean size is
bean, 15/64 of an inch. This is done to separate the good or high-grade beans
from the defective ones which appear black, broken, unhulled and infected or
immature. This is to ensure the quality of the beans produced. Last part of
theprocessing is the roasting of the coffee beans using theroasting machine. Most
beans are kept moving throughout the entire process to keep them from
burning.After roasting, the beans are immediately cooled either by air or water.
Roasting is done to transform green coffee into the aromatic brown beans that the
37
Packaging and Delivery
One way to help preserve freshness is to use coffee packaging for roasted
The beans should be allowed to cool before it is packaged. The target weight per
bag is 10 kg. Deliveries are graded in terms of percentage and total triage by
PRODUCTION CAPACITY
The proposed land of the coffee plantation is 4 hectares or 40,000 sq.
shade trees. Planting holes should be 40 x 40 x 40 cm and the coffee plants should
The roots should be well-developed with an undamaged taproot. The roots must
The table below shows the annual production capacity for the proposed
coffee plantation:
38
Table 3. Annual Production Capacity
Plant
Green
Year no. Cherry
Years bean
planted Total (kg)
(kg.)
yield
1 2 3 4 5 6 7
Plant
12,900
1 no.
Yield
Plant
2,840 10,060
2 no.
Yield
Plant
2,840 10,060
3 no.
Yield
Plant
2,840 10,060
4 no.
Yield 15392 15392 2309
Plant
2,840 10,060
5 no.
Yield 24647 24647 3697
Plant
12900
6 no.
Yield 40119 40119 6018
Plant
12900
7 no.
Yield 40119 40119 6018
QUALITY CONTROL
For quality control, the researchers recommend the employment of an
independent grader. The researchers also recommend that the grader is contacted
with during harvesting seasons, and not regularly employed since the nature of
coffee only provides for harvests in specific quarters. The grader will be provided
samples from the firm’s current harvest and from the products to be delivered. The
sampling containers must be clean and dry to maintain freshness and quality.
39
The researchers also recommend employing the selective method of
picking – this method of harvesting ensures that the harvesters only pick the ripe
coffee cherries in good conditions, devoid of stale, dried, immature or green berries
The harvested cherries are inspected manually to check for defects and
pick out beans that are not up to par. To ensure only the best quality, the beans
are then processed traditionally – without making use of a pulping machine. The
process shall begin not more than twenty-four (24) hours from harvest while the
Thereafter, the beans are collected, and then carefully mixed. A weighted sample
will then be selected, laid out on the table and then systematically checked for
defects, color, insect holes, maturity, and damage, among others. The defects are
tallied and checked against the contracted allowance – which is the allowance
allotted for defects as per quality control measures (currently set at 2%). The
Prior to delivery, the beans are at an acceptable moisture level according to the
The table shown in the next page will guide in the evaluation process.
40
Table 4. Guide in the Evaluation Process
After the evaluation, fifty points are added to the resulting score to give a score
Class 5 Off Grade should receive fifty points and above but
41
The following beans are considered substandard and will be put into waste
management.
since harvest.
very high.
stripping of berries).
42
Foreign Body – Foreign extraneous materials such as sticks,
The International Coffee Council (ICC) states that the minimum standards for
gram sample
12.5 percent.
All coffee supplied for export must be labeled to indicate that it is coffee or a by-
The coffee bean sampled must have a size larger than fifty percent of the
coffee population;
43
one (1) pod or cherry;
two (2) to five (5) partly black or partly sour beans, depending upon the
one (1) stick ranging in size from one-half (1/2) inch to one (1) inch;
three (3) stones passing through a screen size below twelve (12);
one (1) stone passing through a screen size no smaller than twelve (12);
one (1) stick ranging in size from one (1) inch to two (2) inches,
and
sixteen (16).
44
one (1) stick larger than two (2) inches;
and one (1) stone passing through a screen size over twenty
(20).
SITE SPECIFICATION
The selection of the plant location is thoroughly planned and is
approximately selected because this will determine most of the expenses of the
project. This also affects the condition of the crop as to the quality and production.
Farm Location
The proposed location for the plantation is a 4-hectare farmland located in
because of a variety of reasons. The primary reasons are because of its price of
Php 6,000,000.00 which is around Php 150.00 per square meter; the size of 4-
45
hectares that can house a lot of coffee trees; the climate and altitude is perfect for
farming and the location is near the farmers’ residences. This is inclusive of the
security fence.
to coffee shops, grocery stores, and supermarkets. It is also less than an hour’s
drive to the nearest port in Argao for exports. The nearest settlement of Dalaguete
The location is a 15-minute drive to the main road, which will help in the
distribution of coffee. The area is also completely fenced with barbed wire which
46
Figure 4. View of site fence
The lot’s location also boasts a lot of utilities that can be used to the project’s
advantage. Deep wells and connection to electricity help the plantation prosper.
Farm Buildings
There are no existing farmhouses in the property so building a farmhouse
is a necessity. The farmhouse will serve as a shed for temporary storage and as
working and resting areas during planting and harvest seasons. Construction of a
new farmhouse has advantages such as the ability to strategically place where to
put the farmhouse itself. Ideally, it needs to be near the field for efficiency in harvest
and then storage. It must also be near the main roads so that the mini delivery
vans would not be required to enter the farmland itself making loading times faster
Nursery
Beside the farmhouse will be housing for a nursery as coffee leaves are
easily burnt underneath the sun. A nursery is established mainly to raise and
propagate healthy seedlings. The nursery requires shade, water, extra care and
protection from the winds, pests, and rodents. This will ensure a higher grade of
47
quality for coffee. After a year of transplanting all the seedlings in the nursery which
would approximately on the third year, the nursery will then be converted into a
shed for propagation of mushrooms – which is used to earn additional income and
UTILITIES
factors that will make an impact on the long-term costing of the business venture.
Water
Water is an absolute necessity for any farms. The site already has deep
wells making it good for reservoirs of water in case of the dry season. It is also
situated far from the city making the waters clean and fit for the plants to grow.
Coordination with the Metro Cebu Water District is also vital for growth.
Electricity
Electricity is used all around the year for lights and other necessities for
48
Communications
coordinate with customers and prospective buyers. The better choice for
WASTE MANAGEMENT
Coffee only has one sellable product which isthe coffee beans. For every
1000 kilograms of fresh coffee berries, there is about 400 kg of wet pulp. The coffee
pulp contains caffeine, tannins, polyphenols and organic solid residues. It shows
toxic nature and thus not been utilized beneficially. This effluent is being directly
discharged to the nearby water bodies causing severe ailments like giddiness, skin
irritation, stomach pain, nausea, and breathing problem. Severe of this waste
For this reason, the business cannot dump its waste directly into rivers, or
even underground, as this may breed pests in the future. The following steps may
Disposal
The easiest method would be to throw the wet pulps and other refuse
49
digestion can be applied for the treatment of liquid and solid wastes from
Organic Compost
is phosphorus, and 0.5% is potassium. (Padmapriya et. al, 2013). The pulp
can be turned into fertile black soil. The compost also has increased
Mushroom Production
two days, the pulp is mixed with hot water, drained, dried, and then mixed
with mushroom spores. Then, they are put in plastic bags. After 3 – 4 weeks,
the mushrooms will grow out of the holes in the bags and are collected. One
bag allows 2 – 3 mushrooms harvested. This can be eaten or dried and sold
in the market. Every harvest season has a large amount of coffee pulp
Animal Feeds
50
Coffee is rich in nutrients and can be used as animal feeds when
the pulp can be treated with Ca(OH)2 and dried under pressure.
Alternatively, the pulp can be mixed with sugar cane molasses, or urea and
other inorganic substances and put in silos. The silage can be used after 3
as animal feeds is of limited value, since the cost of drying the pulp
sometimes exceeds the gain. Besides, the effects of caffeine, tannin and
Among the four steps of coffee waste management the entity used the
51
CHAPTER III
MARKETING ASPECT
Marketing is the process made to create and satisfy consumer needs and
wants through products and services. This aspect determines the target market
and its favorability to the market’s response to the goods or services offered. The
services and products. By doing so, customer value will improve along with the
profits.
coffee. In this chapter, the researchers prepared questions for the target markets,
TARGET MARKET
The researchers decided to have the different coffee shops located in Cebu
City as their primary markets. The coffee shops targeted would be those that have
made their identities as local brands. Primary markets are the main customer
whom the products are to be sold. They are the market who holds the largest
Secondary markets are the indirect customers of the product. They acquire
products sometimes from the primary market or some through middlemen. This
includes the future primary buyers who purchase at a higher rate in a small market
segment and they influence the primary market. The researchers identified the
52
manufacturers, exporters and coffee drinkers as their secondary markets of the
product.
The conducted survey is tailored only for the primary markets which are the
various coffee franchises in Cebu City. The questions in the survey properly reflect
The researchers’ primary target markets are the coffee shops established
in Cebu City. It is the best market for the product because as the demand for coffee
increases, the number of coffee shops being established also increases and this
for students and businessmen, who nowadays are very fond of drinking coffee in
picture perfect places which are the coffee shops. It is the best choice for the
primary markets because they have a large number of coffee drinkers especially
PAST POPULATION
No data is available for the past population of coffee franchises, but the
following table is the most recent data using 5 years taken from Entrepreneur
Philippines. (Go, 2010) This data represents total coffee shops in the Philippines
including its chain outlets from 2009 up to 2013. As of 2017, there are 47 coffee
franchises and connoisseurs, which include its branches of 155 coffee shops
53
Table 5. Coffee Shop Population in the Philippines (2009-2013)
Philippines and the rate applied to the projected population of the franchises.
DEMAND
Demand is a consumer’s desire and willingness to pay a price for a specific
good or service. Questionnaires and surveys obtained through manual means will
determine demand level. Statistics, news articles, and past data acquired from the
internet and literary sources will determine demand level. Statistics show that total
green bean production has been declining significantly and as a result, the country
imports around 20,000 to 30,000 metric tons of coffee beans to meet supply
beans and is increasing at the rate of three percent (3%) per year. Imports
constitute about half of the market demand due to lack of production. The
continuing production decline annually has already led the industry to depend on
World consumption of coffee in the year 2000 reached 6.3 million metric
tons equivalent to around 750 billion cups and this consumption continues to
54
increase at one to two percent growth per annum. The green coffee beans market
Present Demand
projected demand is the demand the project can expect to provide. Projected
demand is an extremely useful piece of information because this will help in the
logistics of the business and management will know what to expect and know the
standard for that current year’s yield and the following year’s growth.
This present demand will be the basis for the projected demand. The
for future demand. Information from the following tables will support and enhance
the claims made by the researcher on current demands. The following pages will
show our tables that will demonstrate the results of our present demand. There are
purchase the Arabica variety of coffee in order to establish if the product will be
55
Table 6. Coffee Varieties Frequently Purchased
n= 19
The survey shows that 89% of coffee shops purchase Arabica coffee on a
regular basis. This shows that the market already exists for the coffee variety
Arabica. Other percentages show that 47% of coffee shops purchase Robusta as
the second most in-demand coffee variety. This can be useful in case the project
would want to diversify the products. The other varieties of Excelsa and Liberica
show that 5%of coffee shops purchase the products respectively. Other coffee
revealed that mixing Arabica and Robusta is a method of increasing quality as this
will change the coffee’s taste and its rarity. This mixture would be beneficial in
respondents usually prefer in order to plan for future production. This, in turn,would
aid the project because it will help reduce costs of processing by way of minimizing
56
the cost of products that are not in demand in the market or increase revenues by
n= 19
The survey shows that 74% of the respondents prefer to purchase roasted
coffee beans as the favored form. This means that the business will most probably
The next form that is in-demand would be ground roasted beans with a percentage
of 32%. The researchers are speculating whether to buy a grinder or not as this is
not a significant percentage of the total population. Ground coffee also decreases
the shelf life of coffee. Other forms such as unroasted beans or raw coffee cherries
by the market in order to know what forms of supply the researchers will adopt.
This is useful to know because this will determine the current demand and the
57
Table 8. Packages Preferred by the Respondents
n=19
with around 79% of the market preference. This shows that a per kilogram basis
is appropriate for sale in the market or the market does not care what the
packaging is so long as the product comes. The market is already comfortable with
what they are used to and the business need not change the mode of delivery.
The next form most used is by the packet with around 11% of the
respondents. Only 5% use a sack as a package preferred. This means that the
packing.
58
Table 9. Respondent’s Monthly Demand for Regular Coffee
n= 14
A total of 1,326 kilograms are required to supply the various coffee shops
understand the market better and to make better judgments on how to proceed in
59
Table 10. Knowledge of the Arabica variety
n=19
Arabica variety, with 26% of the market not being familiar with the variety of
Arabica. This means that more marketing on Arabica here in the Philippines is
required to make the brand more familiar because it seems that they only know
that they are purchasing Arabica but do not really know its difference from other
coffee variety.
familiar with how their coffee is grown. This is an important thing to understand as
opposed to the sun grown method of growing coffee, which cuts all trees in an area
and grows coffee. Shade grown coffee is environmentally responsible and this will
be better for the future. This will be useful to know to help in the future on whether
60
Table 11. Knowledge of the shade-grown model of growing coffee
n=19
Only 58% of the market knows that the shade-grown model of growing
coffee exists while 32% of the market does not know about the shade-grown
Arabica coffee here in the Philippines is required to make the brand more familiar.
Arabica coffee from the project. This is important to understand because, without
the market’s willingness to purchase the product, the implementation of the project
will fail.
n=19
61
Eighty-five percent of the market is already willing to purchase local coffee
while only 11% will not purchase the product. This only shows that most probably
Reasonability of Price
the price equilibrium where profits are at maximum and the cost is at a minimum.
The prices estimated for the product are are as follows: ₱170.00 for unroasted
beans, ₱400.00 for roasted beans, and ₱600.00 for ground beans. The following
n=1
with 63% who decided that ₱170.00 for unroasted beans is a reasonable price.
n=14
62
Total 14 100%
answered favorably, which means they agree that ₱400.00 for roasted beans is a
possible.
n=6
For the 6 respondents who used ground beans, only 2 out of 6 respondents
answered favorably with only 33% who decided that ₱600.00 for ground coffee
beans is a reasonable price. This is not a favorable conclusion and thus the project
The only choices are to sell the unroasted green coffee beans or to sell the
roasted beans to the coffee shops. The better alternative would be to sell more
roasted beans than unroasted beans as these give a better margin than just selling
it outright after drying. These prices will be the goal of the company as introductory
prices. The researchers included the prices for green beans, roasted, and ground
beans because sometimes it may be more beneficial to sell green beans or to grind
63
The researchers are interested in finding out demand for our current product
to determine the current demand, which are a base for future demand. This will
also be useful in determining who to sell the products in the future. Out of 19
Response
Respondents Total (in kg)
(in kg)
400 1 400
375 1 375
75 1 75
35 1 35
30 1 30
20 1 20
12.5 1 12.5
10 1 10
5 1 5
3 1 3
1 2 2
Total 12 967.5
business’ production capacity. This is good news as high demand is useful for
planning future production, expansion, and improvement. The goal on how to meet
this demand is to meet the larger franchises here in Cebu and supply coffee.
64
Total Demand
The next table shows the total coffee consumed in the Philippines. By 2017,
Authority, 2016)
Currently, Nestle holds a 43% value share of coffee here in the Philippines
Year Population
2017 47
2018 48
2019 49
2020 50
2021 51
2022 52
2023 53
2024 54
2025 55
65
2026 56
SUPPLY
Supply is the total quantity of products available for purchase at a given
price to consumers. Supply must not be too high nor too low. Too high and this
will cause inventory overage and coffee being a commodity must be delivered to
and good quality. On the other hand, supply must also be not too low because
66
The researchers are interested in identifying for who or what supplies the
coffee in coffee shops in Cebu. Identifying the competitors will help the researchers
in determining a viable pricing option and the project’s market share. It will also
help the business recognize the standards employed by the competitors and top
The survey shows that 58% of coffee shops here in Cebu import coffee.
This is the competition the researchers have to beat as international suppliers are
always a threat to local supplies. A majority of the coffee imports come from
Vietnam.
The next suppliers are those from within the Philippines, and theymake up
47% of the market. This means that coffee, at least for coffee shops, is local. A
local competition is good for the economy as this makes prices competitive and
fair.
Other choices such as farms in Cebu like the Tuburan farm make up 5% of
the market. Competition from local sources here in Cebu is minimal. No coffee
67
shops have their own farm or buy from supermarkets, which eliminate a large
competition.
The following table shows the total local production of coffee in the
The table below shows the projected local production for the 10 years
Year Local
Production
2015 72,300
2016 68,685
2017 65,250
2018 61,988
2019 58,889
2020 55,944
2021 53,147
2022 50,490
2023 47,965
2024 45,567
68
2025 43,289
The next table shows the total imports of coffee in the Philippines. By 2017,
there should be around 140,198 kg imported in the Philippines based on the trend.
To compensate for one year, the growth rate average of 18%, which
comes from the last ten years, is added. The following table shows the
projected imports for the 10 years following the most recent accurate data.
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Table 24. Projected Philippine International Imports of Coffee
Year International
Imports
2015 132,150
2016 136,115
2017 140,198
2018 173,846
2019 179,061
2020 184,433
2021 189,966
2022 195,665
2023 201,535
2024 207,581
2025 213,809
PROJECTED SUPPLY
The following table shows the projected supply using the projected average
70
To account for the coffee supply of coffee shops in Cebu, the number of
coffee shops in Cebu is divided by the total number of coffee shops in the
Philippines multiplied by the projected supply of coffee for coffee shops in the
Philippines.
what strategies the company must use to withstand the competition in the market.
There is a production lag and normal operations can start in 2021. Aggressive
marketing should be able to take the market shares of other coffee suppliers. New
research suggests that there is no demand-supply gap as all of the coffee shops
researchers decided not to base the projected market share on the demand-supply
71
completely sell-out as the competitors’ prices are higher and has higher lead times.
The company must strive to take 4% and 6% of the market share on the first two
years of harvest, and 15% of the market share the following years to come.
Table 19
Table 3
2018 36,665 0 - -
2019 37,398 0 - -
2020 38,146 0 - -
2021 38,909 1,570 1,570 4%
2022 39,687 2,408 2,408 6%
2023 40,481 6,261 6,261 15%
2024 41,291 6,261 6,261 15%
2025 42,116 6,261 6,261 15%
2026 42,959 6,261 6,261 15%
SALES FORCE
The researchers recommend the use of direct selling sales force. This is
when the selling partner would go around the market population promoting and
selling the product. Choosing this will cut costs and partners will have invested
72
PRICING STRATEGIES
Coffee is an old product, which means that there are already a lot of existing
markets and existing consumers. The best way to set prices for the product would
be to analyze the competition and to outprice and outsmart them. Since the
Philippines is a net importer, demand is on our size. The biggest competition would
be Nescafe who dominates the world market for coffee supply. Coffee already has
many firms that exist and the products are identical to each other. The only
variations between products are taste, quality, and roasting methods. Some firms
are already dominating the market but are still not large enough to band together
with other companies to be an oligopoly. Coffee is a price taker, which means that
the market will look at the lowest price possible. There are almost no entry and exit
barriers, which means practically anyone, can start up a coffee business. The
buyers of the market are well aware of how coffee is grown and roasted, with
For local competition, the usual prices for roasted beans range around
KapengBarako, Café Amadeo, Kape Isla and other local makers. The biggest
supplier for local competition comes from the SOCCSKSARGEN region with
Statistics, 2012). For international competition, the biggest market for coffee bean
products would be from Indonesia with 73,000 m. tons of imports every year and
Vietnam, with 7,000 metric tons of import annually (Philippine Statistics Authority,
2016). The next competitor that is not roasted coffee beans would be from Nescafe
with their instant coffees. Nescafe’s success is because of its strong marketing
73
mix, with recognizable branding and a strong promotion strategy and non-price
branding is strong giving it high value and making quality as a premium, with its
recognizable red cup and striking logo. There are also numerous promotion
brand. Nescafe also has a non-price competition ensuring uniform price for all its
The following prices are what the researchers expect to sell the coffee for
and what it expects the competitors to sell. The competitive prices are at a rate of
The proponents recommend the selling prices for the projected selling
strategy.
74
DISCOUNTS
For a new competitor in the market, the researchers recommend the grant
The researchers are interested in understanding what the terms of sale the
market will prefer. This is important to know since this will aid in the planning of
funds which include when to expect payments from customers and when to write-
off any doubtful accounts. This knowledge will prepare for any unforeseen
preferring to pay cash upon delivery of the coffee. This is a favorable thing for the
terms of nonpayment. Coffee is also a perishable item, which means that storage
is not viable for a long time, and delivered as fast as possible. Fifteen percent of
the respondents also answered cash paid in advance, even before delivery. This
is the most advantageous answer but with only 15% of the respondents, it is better
75
to expect cash on delivery. This will probably be increased when trust and good
relations is built which is why getting to know the owners of coffee shops is of
extreme importance. The other credit terms range from 1 week to 1 month, with a
15% share in the answers. This is not bad considering a month is still short term.
The firm may grant a 10% trade discount for purchases from the first year
of harvest from the plantation. The researchers recommend the grant as some sort
purchased.
Repeat customers are customers who have purchased any number of kilograms
for two consecutive years. It is to promote loyalty to the newly introduced product
will pay obligations and operating expenses and may use cash received from
purchases.
CHANNEL OF DISTRIBUTION
The channel of distribution is the process how the primary producers will
distribute its finished product to its different types of customers. The channel of
the goods will be directly distributed to its customer while the indirect one is when
the product will first go through to some intermediaries like wholesalers and
retailers.
76
The delivery service will deliver the proposed product to the intended target
market. A delivery van for the products will deliver to the different coffee shops
located in Cebu City. The diagram below shows the flow of the products from the
because this will show how a product can be easily distinguished from all the others
in the market. It is through branding that a product rises and becomes known by
company brand is “Primera Presko” which means that the product is guaranteed
to be fresh and prime. The following figures show what the project should expect
to implement.
For the logo, two P’s mirror each other giving equal focus to quality and
freshness with coffee leaves in the background. The colors red, green, and black
symbolize the three stages of coffee, red as cherries, green as unroasted beans,
and black as roasted beans. The P is also not the traditional one with the curved
and circular head, but straight, with sharp edges to symbolize and emphasize the
advantage that the product has over the other competitors’ brands.
77
Figure 6.PrimeraPresko Logo
industrial, and consumer products. Packaging, just like branding, not only
distinguishes the product among its competitors but most importantly, it maintains
the purity and freshness of its content and protects them from outside environment.
For packaging, the use of a burlap sack is the usual, and on the side of the sack,
the logo is present. This will also help in advertising and in making the brand well
78
Figure 7. Packaging for Primera Presko
people behind a new product to gain recognition from the public. It is achieved by
producers and customers because this helps the producer to inform the public
about their product and would somehow increase their sales while for customers,
79
The researchers recommended using free sampling and brochures as their
type of promotion for the product. Free sampling gives the customers a chance to
try or use the product without any expenses on their part, which is practical in
introducing a new product. Some customers would not risk their money for
something new, making free sampling as an efficient technique or a catch for them,
not just because they have tried the quality of the product but also for the fact that
introduce the product to the customers and give them knowledge about the
varieties and the unique features of the said product. This type of promotion is
somewhat cost effective because it would not cost that much to create a brochure,
it would only need a design that would catch the attention of the public and its
The only limitation in promoting the product is that only select customers
will have the free samples and brochures. The customers are the different coffee
shops located in Cebu City, which is mainly the target market for the product. Free
samples given to those cafes will be 10kg, and distributed only to their main
branch.
80
Figure 8. Social Media Site for Primera Presko
the sun or moisture will rapidly deteriorate the coffee. Burlap bags are often used
for coffee bean storage because they allow airflow. It also preserves the coffee
bean longer than plastic or paper bags. Burlap bag is aired on the patios before
storing coffee to prevent a baggy flavor or burlap scent from being imparted to the
coffee.
Roasted coffee bean maintains its freshness the longest. An inert gas such
as nitrogen will preserve the whole beans for an extended time. Roasted coffee
beans exposed to the environment kept for no longer than a week even if a vacuum
seal is in place. Very darkly roasted coffee is even more vulnerable to oxidation
81
The green coffee beans will have more space than roasted beans in the
warehouse since green coffee beans can be stored for a longer period of time
compared to roasted beans. The roasted beans will only be stored for a short
period while waiting for the delivery. Two vents are located in each room to
82
CHAPTER IV
MANAGEMENT ASPECT
efficient decision making, and careful planning to achieve the company’s goals and
objectives. There should be a clear vision on what the company hopes to be in the
future and an understanding on what the company is doing to get a clear idea on
what steps to take in order to realize these goals and objectives. Proper
management offers long-term benefits to the members of the organization and the
business as a whole. Management directly relates to how efficiently they attain the
fixtures, acquiring raw materials, recruiting employees and training them, and
Project Timetable
The researchers recommend the use of project timetables to help establish
the proper timing of the procedures needed. This tool helps the executor of the
83
proponent to allocate the periods of time necessary to accomplish each activity,
especially the important ones. It also helps them from wasting time on menial tasks
that have been allocated more than enough time – therefore shortening the time
MONTHS
PRE-OPERATING
ACTIVITIES 1 2 3 4 5 6 7 8 9 10 11 12
2018
Establishment of Coffee
Plantation
1. General Project Planning
2. Sourcing of Funds
3. Contractual Negotiations
4. Securing of Business
Licenses and Permits
5. Groundwork
6. Canvassing and Acquisition
of Equipment & Construction
Materials
7. Construction of Buildings
8. Canvassing and Acquisition
of Furniture and Fixtures
9. Acquisition of Raw Materials
10. Recruitment of Employees
11. Training of Employees
12. Advertisements and
Promotions
13. Planting and Maintenance
of Seedlings in Nursery
Lay-outing and Holing
14. Lay-outing and Holing
15. Transplanting
Care and Maintenance
16. Weeding, Mulching,
Caring, and Fertilizing
17. Pest Control
18. Watering
84
PRE-OPERATING
ACTIVITIES 1 2 3 4 5 6 7 8 9 10 11 12
2019
Establishment of Coffee
Plantation
1. General Project Planning
2. Sourcing of Funds
3. Contractual Negotiations
4. Securing of Business
Licenses and Permits
5. Groundwork
6. Canvassing and Acquisition
of Equipment & Construction
Materials
7. Construction of Buildings
8. Canvassing and Acquisition
of Furniture and Fixtures
9. Acquisition of Raw Materials
10. Recruitment of Employees
11. Training of Employees
12. Advertisements and
Promotions
13. Planting and Maintenance
of Seedlings in Nursery
Lay-outing and Holing
14. Lay-outing and Holing
15. Transplanting
Care and Maintenance
16. Weeding, Mulching,
Caring, and Fertilizing
17. Pest Control
18. Watering
85
PRE-OPERATING
ACTIVITIES 1 2 3 4 5 6 7 8 9 10 11 12
2020
Lay-outing and Holing
1. Lay-outing and
Holing
2. Transplanting
Care and Maintenance
3. Weeding, Mulching,
Caring, and Fertilizing
4. Pest Control
5. Watering
that one month of this phase/activity is ample and sufficient to address the
Sourcing of funds
86
partnership, will make use of the contributions of the partners to further the
Contractual Negotiations
Once the capital is secured, the need for an area to conduct the
any space in their homes as an office and the renting of a warehouse. The
coffee trees do not bear fruit all year round. This activity will take two weeks
to accomplish, including the search for possible spaces and the negotiation
with the owner. These discussions also include the contracts for
which will allow a business to lawfully operate. After securing the place of
the executor of the project will follow the standards set by law to acquire its
registered name. The sourcing of business licenses and permits will take
Groundwork
It is necessary to check the soil and test it for any required fertilizers
in the future. Ocular inspection may be needed to find out any specific pests
87
that may be hard to kill as well as the possibility that coffee rust may be
After securing the place of business and complying with the statutory
requirements, there arises the need to prepare and renovate the site to
the site has a clean environment with proper sanitation, considering that the
researched and find the best deal for funds. This phase will take about six
weeks to complete.
Construction of Improvements
shed, the nursery, and the smaller shed to store recent harvests will help
pay for itself in the long run. The required time it will take would be around
88
Canvassing and Acquisition of Furniture and Fixtures
There is a need to canvas for furniture and fixtures to make sure that
those acquisitions are only of the best quality. The procurement of furniture
and fixtures such as tables, chairs, lighting materials and other supplies, is
necessary for the preparation of the site. The canvassing and procurement
of the furniture and fixtures will take approximately two weeks to finish.
from Adlaon, Cebu City, one of the very few areas in Cebu that have
successfully grown coffee. The acquisition will take about one week to do,
and the acquisition includes visiting most of the sellers to scout for the best
quality.
that employees are efficient and qualified to manage the business and
89
The proposed project is a small-scale enterprise operating in the
local community. Thus, it is less costly to make the product known to the
general public. Samples will be given to respondents for one week to let
them evaluate the acceptability and quality of the product introduced. The
Groundwork
to test any differences of soil fertility between the two groundwork tests. If
Pre-Harvest Activities
Coffee will yield on the 4th year, and there must be activities to
maintain and make sure coffee gives a productive harvest. The only
significant part of this action would be the planting and replanting of the
weeding, pest control, and other maintenance works are done evenly
through the year and will continue to do so until the end of the life of the
plantation.
period, the enterprise can already start its usual operations. In this case, the
normal operations will begin when the trees start bearing fruits.
90
MANAGEMENT DURING THE OPERATING PERIOD
Operating period is the time when the business finally does what it intended
to do. The success of the trade lies on how the executor manages the entity’s
Form of Organization
This is essential to every project because its success depends on how
suitable the system is to the type of business engaged into. After deciding what to
implement, the next thing to do is to put up capital for start-up. The proponents
expenses. To form a sole proprietorship would not do, it may not be able to handle
all the activities necessary to operate and manage the business. For these
reasons, the proponents believe that a partnership can provide the needed control
over the commerce, and provide all the partners with security in the case the
project fails.
partners, one contributing land worth Php 6,013,000 and the other partner
contributing Php 1,000,000 cash. Their profit and loss sharing ratio is agreed to be
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60:40 and both are managing partners. The partners will also be legally liable for
Organizational Structure
An organizational structure is the hierarchical arrangement of lines of
people under the employ of the executor and shows how these are assigned,
controlled, and coordinated. It also shows the flow of information between the
visual representation of how the organization is shaped, and how it can best move
structure would work best in businesses that focus on the production and sale of
a single product. The figure below shows the organizational chart for this proposed
commerce.
92
OWNER
(Supervising
Partner)
Bookkeeper
Selling
Farmers Roasters
Partner
must carefully screen the human workforce before recruitment into the company.
There are different functions of the business and various positions which are
available and all of which is described further below. Only the most should occupy
the different stations. There are two partners namely the partner contributing land
who is responsible for supervising the farmers’ day to day works, henceforth
named as “The Supervising Partner,” and the other partner contributing capital
which is responsible for reaching out to customers and selling, henceforth named
93
Oversee all business transactions.
94
Plant the coffee saplings on July
Personnel Specification
The following are the characteristics and qualities that the employee must
Male or Female
95
Preferably has two (2) years of experience in accounting
Computer literate
Farmer
Male or Female
Roaster
96
Above 18 years old
Male or Female
Working Schedule
The following table shows the time required to start and finish a day’s job.
Recruitment Procedure
Selecting prospective employees is an essential job and hirers must be as
thorough as possible. Applicants are filtered through evaluating and testing their
skills and knowledge in the task they applied. The evaluation and testing is done
through a series of interviews and actual initial practice of the job. Until such time,
after thoroughly screening the applicants, the most qualified applicant will then be
hired. This process is one of the most critical stages in making a management
structure since the decision of who is employed reflects the efficiency of the
97
First, set the job vacancies and prepare the job description to determine the
specifications, skills, and guidelines required by the job. The job description helps
in the determination of which applicant is the most qualified. Next, give notice to
the public about the job vacancy through posting on social networking sites, flyers,
and word of mouth. Then, applicants will be required to submit the following
a. Police Clearance
Lastly, after the initial screening of the applicants, the company will then call
the chosen applicants who were qualified for the job. Series of interviews and
ability tests are conducted to thoroughly screen the applicants until the most
qualified is hired.
Compensation Plan
One of the factors that will motivate employees will be remuneration. They
will be more likely to render the jobs well with a satisfactory remuneration plan. A
proper and just compensation will give help to the system and must be established
and maintained. Employees will receive their remuneration twice a month on the
1st Friday and the 3rd Friday. Presented in the following are the wage rates of the
employees.
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Table 31. Wage Rates of the Employees
₱3,750/ payday
Employee Benefits
Giving incentives and insurance will help the livelihood and outputs of the
workers. For the proposed business’ benefit plans, the following would be
advantageous.
Management Policies
The affairs of the business must be managed appropriately to ensure better
treatment for the employees and the organization. The rules created are to prevent
starting work to help guide and facilitate what to do and what not to
99
Employees must arrive on time and sign the attendance sheet.
farmers taking a rest from the oppressive heat of the sun. Farmers
No work, no pay.
100
Tax returns are filed and remitted on time.
findings.
Quality control must be kept high. There can be no defects in the final
product.
Warning W
Reprimand R
Suspension S
Garnishment of Wages G
Termination T
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Table 32. Violations and Sanctions
Tardiness W RG S
Unsigned Attendance W RG S
Negligence of Duty W RG S
Unscheduled Absences W RG S
Destruction of Property W RG S T
Bad Conduct RG SG T
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CHAPTER V
by the government so that it can lawfully start its operations. This chapter contains
the different legal requirements for business registration and also provides matters
regarding taxes related to the proposed project. For convenience in paying taxes,
necessary to comply with the taxes imposed by the government for the benefit of
the public.
LEGAL ASPECT
Any business, whether it is a sole proprietorship, partnership or corporation,
can never operate without conforming to the requisites given by the law. The
venture should not be in contrary to law, morals, good custom, public policy, and
public order. The following are the legal requirements set by the law for the owner
to comply.
and Exchange Commission so that it can attain separate juridical personality since
Articles of Partnership
103
Registration Data Sheet
can be punishable under business laws. A company to transact legally must obtain
the mandated business permits and licenses provided by the government in the
principal location of the proposed plantation, which is in Dalaguete, Cebu City. The
Barangay Clearance
SSS Registration
PhilHealth Registration
Pag-IBIG Registration
104
DOLE Registration
Barangay Clearance
all the necessary requests of the barangay where it is located. The record
municipality.
gives the authority to issue official receipts and invoices. The requirements
Mayor’s Permit
105
BIR Form No. 1901 (Application for Registration) two copies
3. Monthly contribution
4. Schedule of contribution
5. Quarterly contribution
6. Sickness notification
106
Application for PhilHealth Insurance Membership
The application for PhilHealth Insurance Membership is required for
other health benefits to its employees. The necessary requirements are the
following:
Registration.
PAG-IBIG Registration
Registration with the Home Development Mutual Fund (HDMF) is
also needed for every business to secure its Pag-IBIG Employer ID Number
and to provide the required benefits to its employees, who should be fund
107
DOLE Registration
For businesses with five or more employees, they is required to
TAXATION ASPECT
Taxation is the practice of collecting money from individuals, goods or
expenditures. Without taxation, there would be no roads and bridges and public
schools. Every citizen and every business has the responsibility for the
and correctly. This chapter contains the tax requirement applicable to the proposed
business.
108
Withholding Tax
Withholding Tax is an income tax paid to the government, rather than the
income recipient. The tax is withheld/deducted from the income of the recipient.
The amount deducted in advance is a credit against the tax due of the income
recipient. The Withholding Tax must be remitted monthly using the BIR-Form 1601.
As of 2018, the effectivity of the new tax rates released by the BIR is now valid.
However, the withholding tax table is only for estimating the tax due, since
the farmers, roasters, and all other employees employed may have some other
source of income, therefore leading to exceeding the thresholds set by the tax
reform.
of an obligation, right or property incident to it. The form needed is the BIR-Form
2000 and it is filed in three copies, two copies for the BIR and one for the taxpayer.
Deadline for filing is on the 5th day after the end of the month the taxable document
business form of a business partnership – therefore, the business will pay the
Documentary Stamp Tax of Php 15 upon registration and renewal of the BIR and
DTI clearance.
109
Income Tax
Income tax is the tax that governments impose on financial income
generated by all entities within their jurisdiction. The proponents recommend that
income tax, only the partner’s share in the income. Many jurisdictions refer
partnership quarterly.
110
CHAPTER VI
FINANCING ASPECT
money will be needed to put in the commerce and how much money will be earned
necessary pre-operating costs and the actual costs in the normal operation.
evaluate how much of the funds are needed to cover the start-up costs and the
decide where and from whom to acquire the materials and equipment at the least
cost possible.
follow the allocation of the assets to maximize the financial standing of the
business activity. This chapter mainly provides data regarding the distribution of
Source of Financing
There are some sources of financing available to the prospective
implementers, but before any decision regarding the source of funding is made,
111
The amount of capital needed is entirely dependent on the identified costs
of the business. The proposed project is the development of a plantation which will
require a hefty amount of investment. The proponents believe that entering into a
implementers have the option of shouldering the costs using their funds or entering
into loan agreements with banks. The capitalist partner must shoulder the
will receive a higher part of the profit share. The proponents also recommend that
the partnership borrow money from the Land Bank of the Philippines – which
Project Cost
The start-up capital needed will be used to finance the operation and to
cover the costs of legalizing the business, acquisition of the materials necessary,
as follows:
112
Estimated Project Cost
Pre-Operating Expenses Note Subtotal
Research Cost 1 7,700.00
Permits and Licenses 2 9,750.00 17,450.00
Property, Farm, and
Equipment
Land 3 6,013,000.00
Farmhouse 4 301,763.50
Office Equipment 5 28,589.00
Farm Tools 6 8,875.00
6,362,821.50
Furniture & Fixtures 7 10,594.00
Working Capital
Raw Materials 8 4,200.00
Freight In 9 3,000.00
Production Supplies 10 77,088.00
Office Supplies 11 12,537.00
Utilities 12 180,000.00
Cleaning Supplies 13 5,946.00
Salaries and Wages 14 883,350.00
Professional Fees 15 72,000.00 1,238,121.00
7,618,392.50
Total Estimated Project Cost
Note 1
Research Cost
Transportation Cost Php 1000.00
Photocopy and Bookbinding 700.00
Honorarium 3,500.00
Meals and Snacks 500.00
Printing 2,000.00
Total Php 7,700.00
113
Note 2
Permits and Licenses
SEC Registration Php 6,000.00
Health Certificate 150.00
Fire Safety Inspection 100.00
Business Permit Notarization 300.00
Barangay Clearance 150.00
Mayor's Business Permit 600.00
BIR Registration 1,500.00
Zoning Certificate 300.00
Electrical Permit 100.00
Sanitary Permit 300.00
Building Permit 200.00
Documentary Stamp Tax 50.00
Total Php 9,750.00
Note 3
Land
Actual Cost (40,000 sq. m. x Php 150.00) Php 6,000,000.00
Licenses 8,000.00
Survey 5,000.00
Total Php 6,013,000.00
Note 4
Farmhouse
Description Quantity Unit Price Amount
Sand 10 m³ 1,300.00 13,000.00
Gravel 1 m³ 1,300.00 1,300.00
Cement 100 sacks 172.00 17,200.00
Roof 140 sheets 148.00 20,720.00
Gutter 20 pcs 125.00 2,500.00
Primer Red 5 gallons 480.00 2,400.00
Vulcaseal 5 cans 210.00 1,050.00
Tie Wire #16 16 kgs 57.00 912.00
Common Nails (1.5") 5 kgs 54.00 270.00
Concrete Nails 5 kgs 75.00 375.00
Umbrella Nails 5 kgs 80.00 400.00
Hollow Block (4") 700 pcs 7.50 5,250.00
Door Lock 7 pcs 168.50 1,179.50
Door Jamb
(3"x6"18") 7 pcs 780.00 5,460.00
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Marine Plywood
90 pcs 340.00 23,800.00
(1/4"x4"x8")
Deformed Bar
(10mm) 150 pcs 92.00 13,800.00
Steel Angular Bars
100 bars 350.00 35,000.00
(3/16"x2"x20")
C - Purlins 45 pcs 530.00 23,850.00
Text Screw 1000 pcs 1.80 1,800.00
Welding Rod 1 box 695.00 695.00
Coco Lumber
(2"x3"x12") 52 pcs 72.00 3,744.00
Bulb 10 pcs 89.00 890.00
Bulb Socket 10 pcs 25.00 250.00
Fluorescent 12 pcs 200.00 2,400.00
Junction Box 10 pcs 25.00 250.00
Electric Tape (big) 20 pcs 30.00 600.00
Cable Electrical 500 m 35.00 17,500.00
Circuit Breaker (big) 1 8,010.00 8,010.00
Duplex Wire 150 m 40.00 6,000.00
Single Switch 7 pcs 20.00 140.00
Triple Switch 1 pc 30.00 30.00
Two Gang Outlet 3 pcs 60.00 180.00
Three Gang Outlet 2 pcs 50.00 100.00
Urinal Set 1 sets 2,500.00 2,500.00
Faucet 2 pcs 39.00 78.00
PVC Pipe 3 pcs 80.00 240.00
PVC Elbow 2 pcs 25.00 50.00
Total Cost of Php 213,923.50
Materials
Labor Construction:
30 Labor Days 87,840.00
Total Farmhouse Php 301,763.50
Cost
Note 5
Office Equipment
Description Quantity Unit Price Amount
Computer Set 1 P24,199.00 Php 24,199.00
Printer 1 4,390.00 4,390.00
Total Php 28,589.00
115
Note 6
Farm Tools
Description Quantity Unit Price Amount
Rake 12 P189.00 Php 2,268.00
Basket 18 87.00 1,566.00
Coffee bean sieve 6 427.00 2,562.00
Tarpaulin 6 153.00 918.00
Hose 3 514.50 1,543.50
Total Php 8,857.50
Note 7
Furniture and Fixtures
Description Quantity Unit Price Amount
Office Table 2 P2,300.00 Php 4,600.00
Dining Table 1 1,999.00 1,999.00
Chairs 5 799.00 3,995.00
Total Php 10,594.00
Note 8
Raw Materials
Description Quantity Unit Price Amount
Seeds (kgs.) 7 600.00 Php 4,200.00
Total Php 4,200.00
Note 9
Freight-In
Description Amount
Van, inclusive of
Gasoline and
Driver Php 3,000.00
Total Php 3,000.00
116
Note 10
Production Supplies
Note 11
Office Supplies
Description Quantity Unit Price Amount
Ball pen 15 pcs 6.00 90.00
Short Bond paper 3 reams 145.00 435.00
Long Bond paper 3 reams 175.00 525.00
Carbon Paper 3 packs 47.00 141.00
Short Brown Envelope 15 pcs 8.00 120.00
Long Brown Envelope 15 pcs 10.00 150.00
Short Folder 15 pcs 12.00 180.00
Long Folder 15 pcs 14.00 210.00
Due Slips 3 packs 25.00 75.00
Calculator 6 pcs 500.00 3,000.00
Journal Notebook 3 24.00 72.00
Fastener 3 boxes 29.00 87.00
Liquid Eraser 6 25.00 150.00
Logbook 3 59.00 177.00
Marker 6 34.00 204.00
Pencil 9 pcs 7.00 63.00
Puncher 3 75.00 225.00
Ledger 3 25.00 75.00
Stapler 3 15.00 45.00
Staple Wire 3 boxes 6.00 18.00
Scotch Tape 3 30.00 90.00
Scotch Tape Dispenser 3 35.00 105.00
Scissors 3 25.00 75.00
Cash Box 3 2000.00 6,000.00
Receipt Slip 3 75.00 225.00
Total 12,537.00
117
Note 12
Utilities
Description Years Annual Rate Amount
Water 3 Php 36,000.00 Php 108,000.00
Electricity 3 24,000.00 72,000.00
Total Php 180,000.00
Note 13
Cleaning Supplies
Description Quantity Unit Price Amount
Soft Broom 6 50.00 Php300.00
Broomstick 6 50.00 300.00
Dipper 9 30.00 270.00
Pail 9 40.00 360.00
Floor Mop 3 300.00 900.00
Toilet Brush 6 50.00 300.00
Dust Pan 6 60.00 360.00
Garbage Can
(large) 6 400.00 2,400.00
Detergent Soap 12 8.00 96.00
Hand Soap 24 15.00 360.00
Door Mat 6 35.00 210.00
Rags 90 1.00 90.00
Total Php 5,946.00
Note 14
Salaries and Wages
No. of Annual No. of
Description
Workers Salary Years Amount
3 97,500.00 2 Php 585,000.00
Farmers
3 99,450.00 1 298,350.00
Total Php 883,350.00
Note 15
Professional Fees
No. of Annual No. of
Description Workers Fee Years Amount
Bookkeeper 1 24,000.00 3 Php 72,000.00
Total Php 72,000.00
118
CHAPTER VII
FINANCIAL ASPECT
The financial statements show the monetary activities of the business. The
analysis. A structured presentation and a simple form are used to present the
information.
FINANCIAL ASSUMPTIONS
The following are the assumptions used in the preparation of financial
4. The reporting period of the proposed business will use the calendar basis.
119
5. The accounting method used will be Accrual Method.*
6. The proposed business will operate five days every week from Monday to
Saturday at 9:00 am to 5:00 including lunch and snack break, with Saturday
Sales
1. The initial selling price of the product is 450 in the first year. On the second
year, it will still be at 450, but will increase to 500 in the third year. For the
2. Sales are made of 57% Cash Sales, and the remaining 43% in Credit.
3. The entity will offer a trade discount of 10% on the first year, given
indiscriminately.
Direct Materials
2. For roasted coffee, the direct material is the green coffee beans harvested
from the mature trees. The valuation of direct materials is the market price
Direct Labor
1. For the pre-operating period, three farmers are hired at a rate of Php
2. For the operating period, one roaster employed with the same wage rate as
workers.
120
3. Thirteenth month pay is paid every December. Workers not employed for
the whole year, but has worked for at least one month, are entitled to the
4. Labor Cost Summary shows the allocation of the Direct Labor. Allocation of
Factory Overhead
Accounts Receivable
1. The inventory valuation method shall be the First in, First out (FIFO)
Method.
1. The First In, First Out (FIFO) Method is used for inventory valuation.
2. The ending inventory for the Green Beans must be sufficient to cover the
121
1. All purchases of tools, supplies, machines, equipment, furniture, and
fixtures is in cash.
13,000 for survey and licenses. The purchase price accounts for the land
and the safety fence. The safety fence has a value of Php 10,000 and is a
Land Improvement. The Balance Sheet carries the land at Php 6,003,000,
5. Farm equipment, consisting of one coffee huller and a coffee roaster, shall
6. The furniture and fixtures used in the production shall have a useful life of
five years.
7. The Farmhouse constructed on the first month of 2018 shall have a useful
8. The Nursery built on the first month of 2018 will have a useful life of three
9. The Storage shed built from the remains of the nursery shall have a useful
10. Bearer trees are Property, Plant, and Equipment under PAS 41. Therefore,
122
Undeveloped coffee trees do not depreciate. The growing period capitalizes
11. The bearer trees mature on the 4th year and has a useful life of twenty years.
Office Supplies
when used.
2. In the balance sheet, 40% of office supplies will remain to be usable for the
next period. The entity will purchase the 60% every end of the year to
Cleaning Supplies
2. In the balance sheet, 30% will remain to be available for use in the next
period. The entity will buy the 70% every end of the year.
Utilities
1. The Electricity Cost shall increase by 5% annually. The Cost for Water will
increase by 3% annually.
2. The allocation for electricity and water utility is to 80% to factory overhead
123
2. Disbursements for the licenses are general administrative expense only.
Advertising expense
expense.
Withdrawals
1. The partners’ can withdraw any amount as long as the Ending balance does
124
Primera Presko Company
Statement of Financial Performance
For the Years Ended December 31
126
Cash Flow Provided (Used) by Financing
Activities
Loan From Bank 45 - 1,425,000 665,000
Payment of Loan from Bank 45 - (187,500) (287,500) (287,500) (287,500) (287,500) (287,500) (287,500)
Partner's Investment 1,000,000
Withdrawals SOE (1,279,357) (2,377,543) (2,354,873) (2,400,006)
Net Cash Flow Provided (Used) By
Financing Activities 1,000,000 1,237,500 377,500 (287,500) (1,566,857) (2,665,043) (2,642,373) (2,687,506)
Primera Presko
Statement of Changes in Equity
For the Years Ended December 31
127
Primera Presko
Statement of Financial Position
For the years ended December 31
128
SCHEDULE 1:
PROJECTED SALES
SCHEDULE 2:
COST OF GOODS MANUFACTURED AND UNIT COST OF GOODS MANUFACTURED
SCHEDULE 2.1:
PRODUCED AND AVAILABLE FOR SALE
2018 2019 2020 2021 2022 2023 2024 2025
Units in Kilos Produced Per Day - - - 8 13 22 22 22
No. of Working Days - - - 250 250 250 250 250
Units Produced and Available For Sale - - - 2,064 3,311 5,406 5,406 5,406
129
SCHEDULE 3:
COST OF GOODS SOLD
SCHEDULE 3.1:
GOODS SOLD IN UNITS
SCHEDULE 4:
OTHER OPERATING INCOME
130
SCHEDULE 5:
SALES DISCOUNT
Credit Sales (43% of Total Sales) - - - 329,503 620,604 1,124,765 1,185,544 1,209,254
Less: Sales Discount for Customers with 7-day term - - - 3,295 6,206 11,248 11,855 12,093
Less: Sales Discount for Customers with 15-day term - - - 659 1,241 2,250 2,371 2,419
Less: Sales Discount for Customers with 30-day term - - - 593 1,117 2,025 2,134 2,177
Net Credit Sales - - - 324,956 612,040 1,109,243 1,169,183 1,192,567
Discount:
Cash Discounts - - - 6,552 43,601 79,021 83,291 84,957
Credit Discounts - - - 4,547 8,564 15,522 16,361 16,688
Trade Discounts - - - 85,143 - - - -
Total Discounts - - - 96,242 52,165 94,543 99,652 101,645
SCHEDULE 6:
DIRECT MATERIALS
131
SCHEDULE 7:
DIRECT LABOR
Seasonal Laborers
Daily Wage 360 360 367 367 375 375 382 382
Number of Days in Operation - - - 50 50 50 50 50
Total Wages - - - 18,360 18,727 18,727 19,102 19,102
Number of Harvesters - - - 5 5 5 5 5
Total - - - 91,800 93,636 93,636 95,509 95,509
Add: 13th Month Pay - - - 7,650 7,803 7,803 7,959 7,959
Net Pay to Laborers - - - 99,450 101,439 101,439 103,468 103,468
132
SCHEDULE 8:
13TH MONTH
13th Month Pay of Employees 22,500 22,500 22,950 30,600 31,212 31,212 31,836 31,836
13th Month Pay of Laborers - - - 7,650 7,803 7,803 7,959 7,959
Total 13th Month Pay 22,500 22,500 22,950 38,250 39,015 39,015 39,795 39,795
SCHEDULE 9:
LABOR COST SUMMARY
133
Field Requirements - Employed
1. Weed Control Farmers 3 3 3 3 3 3 3 3
(Capitalizable Cost for PPE) Daily Wage 390 390 398 398 406 406 414 414
(CoGM on 4th Year) Number of Days 25 33 22 18 18 18 18 18
Immature Trees Total Costs 29,250 38,610 26,255 21,481 21,911 21,911 22,349 22,349
134
8. Inspection Farmers 3 3 3 3 3 3 3 3
(Capitalizable Cost for PPE) Daily Wage 390 390 398 398 406 406 414 414
(CoGM on 4th Year) Number of Days - 25 50 30 30 30 30 30
Immature Trees Total Costs - 29,250 59,670 35,802 36,518 36,518 37,248 37,248
9. Pruning Farmers 3 3 3 3 3 3 3 3
(Capitalizable Cost for PPE) Daily Wage 390 390 398 398 406 406 414 414
(CoGM on 4th Year) Number of Days - 7 5 5 5 5 5 5
Immature Trees Total Costs - 8,190 5,967 5,967 6,086 6,086 6,208 6,208
135
15. Allowance for Slack Workers 3 3 3 4 4 4 4 4
(Capitalizable Cost for PPE) Daily Wage 390 390 398 398 406 406 414 414
(CoGM on 4th Year) Number of Days 9 10 9 10 10 10 10 10
Immature Trees Total Costs 10,530 11,700 10,741 15,912 16,230 16,230 16,555 16,555
136
SCHEDULE 10:
FACTORY OVERHEAD
SCHEDULE 11:
DEPRECIATION EXPENSE - FOH
137
SCHEDULE 12:
OPERATING EXPENSES
Selling Expenses
Advertising Expense 22 200 200 200 200 200 200 200 200
Sample Expense - - - 4,465 3,804 - - -
Total Selling Expenses 200 200 200 4,665 4,004 200 200 200
TOTAL OPERATING EXPENSES 94,947 103,049 103,413 156,636 162,112 160,829 162,459 163,378
138
SCHEDULE 13:
CLEANING SUPPLIES EXPENSE
SCHEDULE 14:
PRODUCTION SUPPLIES
139
SCHEDULE 15:
PERMITS AND LICENSES EXPENSE
SCHEDULE 16:
UTILITIES EXPENSE
Total Utilities Expense 61,800 64,080 66,452 80,801 83,370 86,045 88,828 91,726
140
SCHEDULE 17:
FARM TOOLS EXPENSE
SCHEDULE 18:
INSURANCE EXPENSE
SCHEDULE 19:
DEPRECIATION EXPENSE - SELLING AND ADMINISTRATIVE EXPENSE
141
SCHEDULE 20.
OFFICE SUPPLIES EXPENSE
SCHEDULE 21:
PROFESSIONAL FEES
142
SCHEDULE 22:
ADVERTISING EXPENSES
SCHEDULE 23:
REPAIRS AND MAINTENANCE
SCHEDULE 24:
ACCOUNTS RECEIVABLE
SCHEDULE 25:
ALLOWANCE FOR DOUBTFUL ACCOUNTS
143
SCHEDULE 26:
ROASTED COFFEE FINISHED GOODS INVENTORY
SCHEDULE 27:
PROPERTY, PLANT, AND EQUIPMENT
144
Accumulated Depreciation
Land Improvements 27 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Office Equipment 28 5,718 11,436 17,153 22,871 28,589 28,589 28,589 28,589
Furniture and fixtures 29 2,119 4,238 6,356 8,475 10,594 10,594 10,594 10,594
Farm Equipment 30 - - - 8,160 16,320 24,480 32,640 40,800
Farmhouse 31 30,176 60,353 90,529 120,705 150,882 181,058 211,234 241,411
Nursery 34 19,905 39,809 59,714 - - - - -
Storage Shed 34.1 - - - 10,599 21,197 31,796 42,395 52,994
Mature Trees 33 - - - 27,816 62,650 97,485 132,319 167,153
Total Accumulated Depreciation 58,918 117,835 176,753 202,627 295,233 380,002 464,771 549,540
Carrying Amount
Total PPE 6,873,980 7,478,459 8,067,102 8,283,245 8,283,245 8,283,245 8,283,245 8,283,245
Total Accumulated Depreciation 58,918 117,835 176,753 202,627 295,233 380,002 464,771 549,540
Total PPE, net 6,815,062 7,360,624 7,890,350 8,080,618 7,988,012 7,903,243 7,818,474 7,733,705
SCHEDULE 27.1:
LAND IMPROVEMENTS
SCHEDULE 28:
OFFICE EQUIPMENT
Accumulated Depreciation:
Computer set 4,840 9,680 14,519 19,359 24,199 24,199 24,199 24,199
Printer 878 1,756 2,634 3,512 4,390 4,390 4,390 4,390
Total Accum. Dep'n 5,718 11,436 17,153 22,871 28,589 28,589 28,589 28,589
145
SCHEDULE 29:
FURNITURES AND FIXTURES
Accumulated Depreciation
Office Table 920 1,840 2,760 3,680 4,600 4,600 4,600 4,600
Dining Table 400 800 1,199 1,599 1,999 1,999 1,999 1,999
Chairs 799 1,598 2,397 3,196 3,995 3,995 3,995 3,995
Total 2,119 4,238 6,356 8,475 10,594 10,594 10,594 10,594
SCHEDULE 30:
FARM EQUIPMENT
Accumulated Depreciation
Coffee Huller - - - 2,550 5,100 7,650 10,200 12,750
Coffee Roaster - - - 5,610 11,220 16,830 22,440 28,050
Total - - - 8,160 16,320 24,480 32,640 40,800
146
SCHEDULE 31:
FARMHOUSE
SCHEDULE 32:
CONSTRUCTION IN PROGRESS - IMMATURE COFFEE TREES
Disclose: Uses capitalising costs
DIRECT LABOR
Site Preparation 31,590 11,700 - - - - - -
Installation Cost - Planting 54,990 17,550 - - - - - -
Field Requirements 182,520 263,250 298,350 35,557
Allocated to Trees (Total * Immature Trees/All Trees) 269,100 292,500 298,350 35,557 - - - -
147
MANUFACTURING OVERHEAD
Farmhouse Depreciation 11 30,176 30,176 30,176 30,176
Nursery Depreciation 11 19,905 19,905 19,905 -
Land Improvement Depreciation 1,000 1,000 1,000 1,000
Utilities Expense 16 51,600 53,532 55,541 57,631
Production Supplies 14 29,224 25,696 22,168 29,866
Pag-Ibig Contribution 40 3,600 3,600 3,600 4,800
SSS Contribution 36 19,890 19,890 19,890 26,520
PhilHealth Coontribution 38 3,600 3,600 3,600 4,800
Government Grants
Total Capitalizable Costs for Coffee Trees 460,319 604,480 588,643 88,270
Number of Coffee Trees planted in 2018 10,062 10,062 10,062 -
Cost per Coffee Tree - 2018 46 93 138 -
Carrying Amount for Coffee Trees - 2018 460,319 931,740 1,390,811 -
Carrying Amount for Immature Trees, beginning 460,319 1,064,799 1,653,442 350,901
Moved to Mature Trees 1,390,811 350,901
Carrying Amount for Immature Trees, end 460,319 1,064,799 262,631 -
148
SCHEDULE 33:
MATURE COFFEE TREES - PPE
Mature Trees
planted in 2018 - - 1,390,811 1,390,811 1,390,811 1,390,811 1,390,811 1,390,811
planted in 2019 - - - 350,901 350,901 350,901 350,901 350,901
Mature Trees - - 1,390,811 1,741,711 1,741,711 1,741,711 1,741,711 1,741,711
Accumulated Depreciation
planted in 2018 - - - 27,816 55,632 83,449 111,265 139,081
planted in 2019 - - - - 7,018 14,036 21,054 28,072
Total Accumulated Depreciation, Mature Trees - - - 27,816 62,650 97,485 132,319 167,153
SCHEDULE 34:
NURSERY BED
SCHEDULE 34.1:
STORAGE SHED
149
SCHEDULE 35:
TOTAL ACCRUALS
SCHEDULE 36:
SSS CONTRIBUTION
Monthly Contribution Annual Contribution
Year Monthly Salary Annual Salary Employer Employee Employer Employee
2018 Per Worker 7,500 90,000 553 273 6,630 3,270
x No. of Workers 3 3 3 3 3 3
Total 22,500 270,000 1,658 818 19,890 9,810
150
2023 Per Worker 7,803 93,636 589 291 7,072 3,488
x No. of Workers 4 4 4 4 4 4
Total 31,212 374,544 2,357 1,163 28,286 13,954
SCHEDULE 37:
ACCRUED SSS PAYABLE
SCHEDULE 38:
PHILHEALTH CONTRIBUTION
151
2019 Per Worker 7,500 90,000 138 138 1,650 1,650
x No. of Workers 3 3 3 3 3 3
Total 22,500 270,000 413 413 4,950 4,950
152
SCHEDULE 36:
ACCRUED PHILHEALTH CONTRIBUTION
Sched 2018 2019 2020 2021 2022 2023 2024 2025
Accrued PhilHealth Contribution Beg. 0 825 825 825 1,100 1,100 1,100 1,100
Add: PhilHealth Contribution
Employer's share 38 4,950 4,950 4,950 6,600 6,600 6,600 6,600 6,600
Employee's share 38 4,950 4,950 4,950 6,600 6,600 6,600 6,600 6,600
Total PhilHealth Contribution Payable 9,900 10,725 10,725 14,025 14,300 14,300 14,300 14,300
Less: Payments
Prior - 825 825 825 1,100 1,100 1,100 1,100
Current 9,075 9,075 9,075 12,100 12,100 12,100 12,100 12,100
Total 9,075 9,900 9,900 12,925 13,200 13,200 13,200 13,200
Accrued PhilHealth Contribution End 825 825 825 1,100 1,100 1,100 1,100 1,100
SCHEDULE 40:
PAG-IBIG CONTRIBUTION
Monthly Contribution Annual Contribution
Year Monthly Salary Annual Salary Employer Employee Employer Employee
2018 Per Farmer 7,500 90,000 100 100 1,200 1,200
x No. of Farmers 3 3 3 3 3 3
Total 22,500 270,000 300 300 3,600 3,600
153
2023 Per Farmer 7,803 93,636 100 100 1,200 1,200
x No. of Farmers 4 4 4 4 4 4
Total 31,212 374,544 400 400 4,800 4,800
SCHEDULE 41:
ACCRUED PAG-IBIG CONTRIBUTION
SCHEDULE 42:
ACCRUED INCOME TAX PAYABLE
154
SCHEDULE 43:
ACCRUED UTILITIES EXPENSE
SCHEDULE 44:
LOANS PAYABLE
Current Portion of Loans - 187,500 287,500 287,500 287,500 287,500 287,500 287,500
Discount Amortization for 2019 Loans - 13,807 12,306 10,671 8,889 6,947 4,832 2,363
Discount Amortization for 2020 Loans - - 7,410 6,446 5,393 4,244 2,990 222
Total Current Portion of Loans - 173,693 267,783 270,383 273,218 276,308 279,678 284,915
Discount, beginning -
From 2019 59,815
From 2020 26,706
Discount, end 59,815
155
Schedule : Interest Expense
Interest from 2019 46 - 127,685 112,245 96,681 80,983 65,139 49,135 32,957
Interest from 2020 47 - - 60,794 52,410 43,946 35,393 26,744 17,990
Total Interest Expense - 127,685 112,245 96,681 80,983 65,139 49,135 32,957
SCHEDULE 46:
TOTAL FIXED COST
Factory Overhead Sched 2018 2019 2020 2021 2022 2023 2024 2025
Depreciation Expense 11 51,081 51,081 51,081 77,751 84,769 84,769 84,769 84,769
Utilities Expense 16 51,600 53,532 55,541 57,631 59,804 62,065 64,417 66,864
Production Supplies 14 29,224 25,696 22,168 29,866 32,344 59,871 59,871 59,871
Repairs and Maintenance 23 - - - 5,967 6,086 11,086 11,208 11,208
Pag-Ibig Contribution 40 3,600 3,600 3,600 4,800 4,800 4,800 4,800 4,800
SSS Contribution 38 19,890 19,890 19,890 26,520 28,286 28,286 28,286 28,286
PhilHealth Contribution 3,600 3,600 3,600 4,800 4,800 4,800 4,800 4,800
Total Factory Overhead 158,995 157,399 155,880 207,335 220,890 255,678 258,152 260,599
Selling Expenses
Advertising Expense 22 200 200 200 200 200 200 200 200.00
Sample Expense - - - 4,465 3,804 - - -
Total Selling Expenses 200 200 200 4,665 4,004 200 200 200
TOTAL FIXED COST 277,942 284,448 283,773 381,951 395,730 419,292 422,697 425,594
156
SCHEDULE 47:
TOTAL VARIABLE COST AND VARIABLE COST PER UNIT
SCHEDULE 48:
INCOME TAX
Higher of RCIT and MCIT (28,484) (30,915) (31,024) 121,024 496,685 1,059,303 1,084,109 1,103,897
SCHEDULE 49:
DEFERRED TAX ASSETS
157
Sched 2018 2019 2020 2021 2022 2023 2024 2025
Net Operating Loss Carry-Over Application
From 2018 (28,484)
From 2019 (30,915)
From 2020 (31,024) -
Applied to Income Tax Payable 90,423 -
SCHEDULE 50:
ACCRUED WITHHOLDING TAX PAYABLE
158
FINANCIAL STATEMENT ANALYSIS
Financial Statements are a collection of reports about the financial
results, financial condition, and cash flows of the entity. It is useful because they
determine the ability of a business to generate cash and the sources and uses
of it. Another importance of financial statements is that they are used to derive
having different objectives in learning about the fiscal conditions of the entity.
Current Ratio
obligations. It measures whether or not a firm has enough resources to pay its
CURRENT RATIO
2018 2019 2020 2021 2022 2023 2024 2025
Current Assets 109,867 713,767 480,256 736,453 537,215 594,560 584,458 570,672
Current Liabilities 6,876 180,395 274,511 317,139 418,939 573,658 583,752 594,358
Current Ratio 15.98 3.96 1.75 2.32 1.28 1.04 1.00 0.96
As seen in the table above, the entity started with a high current ratio, but
a too high working capital proportion would draw attention to the company’s
mismanagement of its current assets. In this case, however, the entity’s current
Quick Ratio
Quick ratio measures the current short-term liquidity and position of the
company without relying on its inventories. It uses accounts that are effortlessly
QUICK RATIO
2018 2019 2020 2021 2022 2023 2024 2025
Quick Assets 109,867 713,767 480,256 659,649 432,264 451,513 433,124 411,222
Current Liabilities 6,876 180,395 274,511 317,139 418,939 573,658 583,752 594,358
Quick Ratio 15.98 3.96 1.75 2.08 1.03 0.79 0.74 0.69
The calculations above show that even though the entity already
accounts, the quick ratio still ended up being decreasing just like the current
ratio. Nonetheless, this does not necessarily mean it is going into bankruptcy. A
too high relation between the quick assets and current liabilities just like what
happened in the first year might have idle cash or too many receivables, but to
the inventory is sold or used in a period. The turnover indicates how quick the
160
FINISHED GOODS INVENTORY TURNOVER
2018 2019 2020 2021 2022 2023 2024 2025
Cost of Goods Sold - - - 844,845 1,219,882 1,661,136 1,816,012 1,913,410
Average FG Inventory - - - 76,804 90,877 123,999 147,191 155,393
FG Turnover - - - 11 13 13 12 12
Average FG Inventory:
Beginning Balance - - - - 76,804 104,951 143,047 151,334
Ending Balance - - - 76,804 104,951 143,047 151,334 159,451
Total - - - 76,804 181,755 247,998 294,382 310,785
Divided by - - - 1 2 2 2 2
Average FG Inventory - - - 76,804 90,877 123,999 147,191 155,393
The Finished Goods Inventory Turnover shows that on the first year of
normal operations, the entity was able to convert their inventory 11 times which
makes it favorable to the management knowing it was only their first year of
harvest and they already transformed many of their supplies to sales. Although
the trend was decreasing, it somehow made the turnover stable which is a good
indicator because it will help them project the conversion of their inventory into
a sale.
the warehouse.
161
Since the commodity has a limited shelf life, the entity must be vigilant as
to the period the inventory stays in the warehouse. According to the calculations,
the company managed to sell its stash at a time which is lesser than the 90-day
shelf life of the commodity. The short inventory age brings a positive impact on
Average Accounts
Receivable:
Beginning Balance - - - - 27,080 51,003 92,437 97,432
Ending Balance - - - 27,080 51,003 92,437 97,432 99,381
Total - - - 27,080 78,083 143,440 189,869 196,812
Divided by - - - 1 2 2 2 2
Average Receivables - - - 27,080 39,042 71,720 94,934 98,406
However, they should not take this lightly because a decreasing turnover is
162
nevertheless alarming. They should reassess their credit policies to ensure the
timely collection.
cash. The entity can collect its receivable within its credit term of 30 days.
However, the firm should improve their accounts receivable period by increasing
their accounts receivable turnover. The company must not be complacent that
they have at least a receivable period equal to their credit term, they should aim
Return on Equity
163
RETURN ON EQUITY
2018 2019 2020 2021 2022 2023 2024 2025
Net Income
(Loss) (66,463) (72,135) (72,389) 583,799 1,158,931 2,471,708 2,529,587 2,575,760
Average Equity 6,946,537 6,910,470 6,838,208 7,093,913 7,325,600 7,312,469 7,446,908 7,622,142
Return on Equity -1% -1% -1% 8% 16% 34% 34% 34%
Average Equity:
Beginning
Balance 0 6,946,537 6,874,402 6,802,014 7,385,813 7,265,386 7,359,551 7,534,265
Ending Balance 6,946,537 6,874,402 6,802,014 7,385,813 7,265,386 7,359,551 7,534,265 7,710,019
Average Equity 6,946,537 6,910,470 6,838,208 7,093,913 7,325,600 7,312,469 7,446,908 7,622,142
Since the company has negative income it also yields a negative ROE,
but this does not mean that the entity is performing below par because not all
firms with negative ROEs are poor investments. The project has an increasing
ROE even though it started as negative and a rising Return on Equity (ROE)
means that the business is increasing its ability to generate profit without
management-controlled costs.
164
The entity’s high operating margin ratio is indicative of the fact that more
operating margin ratio because the firm was able to manage its overall cost
profitability. Aside from this, the business should also make a comparison of
their own operating profit margin ratio to the average operating profit margin of
the industry.
Total Asset Turnover measures how efficiently a company uses its total
Average
Total
Assets:
165
A high Total Asset Turnover Ratio is indicative of the efficiency of the
company in the use of its assets to generate sales. The lower the ratio is, the
more inefficient the use of the assets is, and it reflects in the sluggish sales.
management; the company still needs to compare this with the industry average
of 1.64.
Equity Multiplier
EQUITY MULTIPLIER
2018 2019 2020 2021 2022 2023 2024 2025
Total 6,938,56
Assets 2 8,102,341 8,412,448 8,595,793 8,543,183 8,513,118 8,415,544 8,314,348
Averag
e 6,929,73
Equity 7 6,885,270 6,796,040 6,975,718 7,254,761 7,365,086 7,507,029 7,679,997
Equity
Multip
lier 1.00 1.18 1.24 1.23 1.18 1.16 1.12 1.08
Averag
e
Equity:
Beginn
ing
Balanc
e - 6,929,737 6,840,802 6,751,278 7,200,159 7,309,362 7,420,809 7,593,249
Ending
Balanc 6,929,73
e 7 6,840,802 6,751,278 7,200,159 7,309,362 7,420,809 7,593,249 7,766,746
166
The entity’s equity multiplier ranges from 1 up to 2 only. The low amount
indicates the company uses less debt to finance its assets. It would mean they
relied on their equity in supporting their assets. The entity should only use their
same sector.
Break-Even Analysis
or product can make, by showing at what level of production costs are covered
CONTRIBUTION MARGIN
2018 2019 2020 2021 2022 2023 2024 2025
Selling Price
per Kilo - - - 400.00 450.00 500.00 510.00 520.20
Varible Cost
per kilo - - - 158.85 173.50 188.64 205.46 223.64
Contribution
Margin per
kilo - - - 241.15 276.50 311.36 304.54 296.56
BREAK-EVEN POINT
2018 2019 2020 2021 2022 2023 2024 2025
167
Break-
even Sales
in units 1,930 1,559 1,462 1,478 1,528
The entity needs to sell 1,930 kilos of roasted coffee beans at a price of
400 pesos to break-even in the first year of operations. Same goes for the
following year; the business needs to sell a definite number of kilos at a specific
Payback Period
investment of a project from the cash flows it produces. The payback period for
1,189,07
2022 6,645,053 2 0.57 674,711.33 5,970,341.19 1
2,415,94
2023 5,970,341 7 0.51 1,223,994.18 4,746,347.01 1
2,413,37
2024 4,746,347 3 0.45 1,091,687.49 3,654,659.52 1
2,458,48
2025 3,654,660 9 0.40 992,942.40 2,661,717.12 1
Payback Period cannot payback within 8 years
168
A short payback period is an indication of how quick you can get back
what the amount spent on the investment. In this case, an investment involving
long-term plant fields would inevitably end up in losses for the first few years
due to the lack of harvests to available to for sale. The partnership was not able
to recover what they have invested within five years and even with an 8-year
period. Nevertheless, on the 10th year, it will have reached the payback period.
SENSITIVITY ANALYSIS
Inflation Rate is one of the factors that contribute to the changes in the
these economic changes to the business. Given below are the different
169
Repairs and Maintenance
10% 10%
Expense
Professional Fees 10% 10%
Shown in the succeeding pages are the Financial Statements under each
scenario.
170
Case 1
Primera Presko Company
Statement of Comprehensive Income
For the Years Ended December 31
Less: Finance Cost 94,947 103,049 103,413 155,986 160,888 158,611 160,121 160,993
Net Operating Income (Loss)
Before Income Tax (94,947) (103,049) (103,413) 726,636 1,598,713 3,346,250 3,399,426 3,443,941
172
Case 3
Less: Finance Cost 98,024 105,840 106,240 163,040 167,981 165,745 167,298 168,215
Net Operating
Income (Loss)
Before Income Tax (98,024) (105,840) (106,240) 719,582 1,591,620 3,339,116 3,392,248 3,436,718
173
Comparative Ánalysis
Return on Equity
Original - - - 7.97% 15.85% 33.19% 33.19% 66.82%
Case 1 - - - 7.28% 14.51% 30.77% 30.69% 61.77%
Case 2 - - - 7.94% 15.78% 33.12% 33.12% 66.68%
Case 3 - - - 7.25% 14.47% 30.79% 30.73% 61.87%
174
Analysis
Case 1 showcases the net effect of the decrease in selling prices. There
in selling prices. This is indicative of the firm’s sensitivity when it comes to its
selling prices.
Case 1 and Case 2 bring about a negative effect on the financials of the
changes in Case 1 and Case 2, will have the lowest net income. Of the net
change in net income of 52,000, majority of the change is cause by the changes
the firm has a higher income when the expenses are raised by 10% than when
the firm’s unit selling price is decreased by the same percentage. This is an
indication that the firm’s selling price has more impact than the operating
expenses. This is an advantage to the company since they cannot control how
much they need to pay annually, and that even if the entity did have control over
the expenses, it would only impact the operations minimally. The selling prices,
however, are under the control of the company, which is an advantage since,
For the Returns on Equity (ROE), the researchers have provided the
ratios with 2 decimal places in order to fully express the changes. For the first 3
years of operations in Case 1 and the original scenario, the ROE is the same
since they will only be incurring expenses in the same amount. As shown in the
Comparative Analyses, Case 2 always has the highest return. This is another
proof of the fact that the Expenses have a far lesser impact on the operations
shows that of the various cases, Case 3 ends up the one with highest Breakeven
Point in Sales. While it may not initially reveal Operating Expenses having a
lesser impact than the Selling Prices, a deeper look into the composition of the
items will prove that a change in Selling Prices has much more impact on the
176
CHAPTER VIII
SOCIO/ECONOMIC DESIRABILITY
change in any established undertaking will give rise to many effects that may or
may not be intended. This first law of motion described by Isaac Newton applies
project may bring about many advantages. As this project is applied, the
following sectors may profit. The schematic diagram next page clarifies the
benefits and its outcome, and the succeeding paragraphs will discuss clearly.
Government
The government’s primary source of revenue is the tax collected from the
taxpayer. Law, as it is the lifeblood of the government requires the levy. The
Farmers
The project plans to make use of the farmers’ abilities. Their skills are
one of the foundations for the success or failure of the project. The farmers will
177
receive compensation for the services they render; they will receive reasonable
remuneration for their time, efforts, and diligence during the business. Their
receipt of compensation can help farmers earn a livelihood for their families and
Target Market
The researchers have observed an increasing number of cafes and
machines selling coffee. Bottled coffee such as Kopiko 78 and coffee ready-to-
drink tetra packs such as Nescafe’s French Vanilla, Caramel Macchiato, and
Café auLait, have also increased. This is evidence of greater demand for coffee.
The producers of these products require a steady supply of coffee beans that
the project intends to provide for after the implementation. Provision of a steady
stock of coffee beans can give stability to the target market, which will help them
Environment
The proposed method of coffee cultivation is the traditional method or the
seedlings under the shade of leafy trees. This technique has many benefits to
the environment as a whole. “The presence of a tree cover on what are often
and minimize soil erosion. The tree roots, canopy cover, and leaf litter on the
178
ground all help do this.” (Rice, 2010) The shade-grown system aids the
Community
The community will be able to lessen unemployment rate through the
Tuburan coffee plantation which gave 900 jobs to farmers. The provision of new
jobs keeps residents away from illegal vices and instead focus on the cultivation
of the farm. The introduction of more jobs after the implementation of this project
can help ensure the future of the honest and the decent.
Philippine economy
The researchers envision the Philippines to cease being a net importer
and demand of coffee/coffee beans. The disparity has led to coffee prices
staying in the high level of Consumer Price Index (CPI). Recent research has
shown that coffee prices are on the rise and will continue to do so. (Reyes, 2011)
By this, the product will grow to be more expensive, but implementation of this
project may help mitigate the sudden increase in prices. Once the country stops
relying on others for the purchase of coffee, the economy can stand more on its
own.
Global economy
The export of coffee/coffee beans is also at a high level of demand. The
high export rate means that other countries also have an increasing need for
caffeine. However, not all nations are capable of growing coffee trees/shrubs
179
due to their climate and terrain. Other republics with little land to spare or those
with barren lands can benefit, like Singapore or Australia. The unsuitability of
other nations’ land for growing coffee ensures that the product will be
marketable and sought-after. International trade will also help maintain or even
Coffee Industry
Aside from consumable coffee drinks, coffee can produce quite a lot of
aromatics, and others. So far, coffee has only been used to produce cosmetic
products (e.g., Pond’s Men Energy Charge) aside from the usual consumption.
More coffee would mean more room for experimentation for the creation of
Ecology
The shade-grown method of growing coffee makes sure has a positive
and Asia have all been found to harbor a high diversity of shade trees. Taller
and more structurally diverse shade tends to have more bird diversity than
coffee trees can also help in the plight of the honeybees as they are rapidly
dying in the world with a rate of 30 percent each year.” (McDonell, 2015) This
project also aims to have no carbon footprint, helping the world be a better place.
180
Coffee Consumers
The ultimate coffee consumers can expect lower prices for coffee
provides better tasting coffee and superior quality than the sun-grown coffee –
which is the norm for most coffee products because of its convenience. Local
consumers can also expect coffee that is richer in taste, texture, and aroma,
possibly paving an entry for the Philippine coffee in the international trade.
Competitors
A new competitor in the market will drive others to improve their business
more effort in managing and selling tactics. It will also encourage them to
181
SECTORS BENEFITS
OUTCOMES
Increased
More
government funds
Government revenues
lead to better
from permits,
Global management and
licenses and
Economy services to its
taxes
people
Just Better
compensation standards of
and a steady living for
income. Honest families
Farmer
pay for honest
work
Reliable source
of raw materials
that can be
Steady supply
Target turned into
of coffee
Market finished products
Figure 12. beans
leading to profits
Schematic
Diagram
Stabilize slopes,
Trees need minimize erosion
not be cut that will prevent
Environment
for the landslides,
plantation positively impact
carbon footprint
Provide
Community employment Regular income,
to the jobless lesser crime rate
A stronger,
Philippines lessens more
Philippine dependence on independent
Economy other countries for economy can
coffee be expected
182
Global Steady supply International
Economy of quality trade
Filipino coffee relations will
improve
Opportunity to
Coffee Increased improve and
Industry supply for increase other
coffee beans varieties of
coffee-based
products
Homes for
Healthier
Ecology birds and
biodiversity
other animals
are made
Costumer
delight;
More supply, improves
Coffee better prices, internation
Consumer better quality for al image of
s local and foreign Philippine
consumers/users coffee
Improved business
Drives others to
model and
exert effort to
marketing
Competitors improve quality
strategies;
products or
encourage shade-
services
grown model
183
CHAPTER IX
planning method that evaluates the elements of a business. This analysis helps
the trade focus its strengths, convert weaknesses to strengths, minimize threats
184
SWOT MATRIX
STRENGTHS
Arabica coffee is a known
premium variety
Shade-grown method yields
better quality than sun-grown
method
Possibility of intercropping
Easy accessible to the target
market
WEAKNESSES
Product has short shelf life
Arabica coffee is less pest
resistant than other forms
Shade-grown coffee has less
yield than sun-grown or
modern method
Lack of access to quality and
affordable planting materials
of small farmers
185
OPPORTUNITIES
Increasing growing market
for specialty coffee
Increasing trend of coffee
shops’ identity as “local”
Increasing youth preferring
coffee over other beverages
THREATS
Impact of climate change
Existing cheaper and better
quality imported coffee
Competition with established
and local well-known brands
Existing coffee drinkers may
change preference to other
beverages
STRENGTHS
coffee. This means that the target market is familiar with the product. The
business also adopts the shade-grown method of growing coffee, which makes
products of better quality than the sun-grown method of growing coffee. With
which gives additional yield income, and it will maintain the soil fertility as the
nutrient uptake is from both layers of soil, it controls weeds and provides support
to the other crop. Lastly, the plantation is relatively near to the market, which
186
means that the product is more accessible to the target market compared to the
WEAKNESSES
weaknesses of the proposed project include the product having a short shelf life
and Arabica coffee being less pest resistant. Having high start-up costs is also
a weakness for starting a plantation. Coffee takes three years until first harvest
and five years until common yield and has seasonal crops, which delay the
payback period. The farm uses a shade-grown method, which has lesser yield
business. Lastly, there is also a lack of access to quality and affordable planting
Coffee has a short shelf life and coffee will spoil if left in humid area. To
remedy this, the coffee beans will be kept in a nippy and dry warehouse and is
after eight months, while roasted coffee beans spoil within one month. It is
shelf life.
Arabica coffee is also less pest resistant than other forms and to remedy
this, the project plans to coordinate with the government sectors. Examples of
these are the Department of Science and Technology’s existing coffee research
187
and the Department of Agriculture’s coffee initiative. By partnering with the
government, better crop yield may be researched and will help immensely in
is smooth.
Coffee is also seasonal and takes a long time to mature. During this time,
it may be more beneficial to roast coffee beans bought from other farms and
farmers can be used in the project’s favor to show what will happen when it is
invested into. By showing the effects of what happens if the there is ample
support for the agricultural sector, the success of coffee grown using the shade-
The high start-up costs can be mitigated by timing when to loan and when
1st year of operation or to defer it to the usual operations, the funds will go a
long way.
OPPORTUNITIES
Before the implementation of the business, it is essential to know its
external factors that symbolize the incentive for a business to survive and thrive
in the market. The openings for the proposed business include increasing
growing demand for specialty coffee, end users preferring locally grown coffee
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beans, and increasing youth favoring coffee over other beverages. Specialty
coffees are grown in distinct and ideal climates and are distinctive because of
their full cup taste and little to no defects. The coffee plantation being shade-
Furthermore, coffee shops like Bo’s Coffee are more interested in locally grown
coffees than those imported coffees. This interest in locally grown coffee would
really give a positive impact on the plantation. Lastly, study-outs are now
becoming a trend, and most youths prefer doing study outs in coffee shops thus
giving the business advantage of the increasing number of students who have
THREATS
Threats are inherent in every business. Threats are always dangerous to
One of the dangers of the proposed project is the impact of climate change. The
changing climate affects the growth of the plants and the operations of the
business. Existing cheaper and better quality imported coffee is also a threat
because the market always prefers quality content products that imported ones
can offer. Other risks are the competition with established and local well-known
brands in Cebu and existing coffee drinkers may change the preference to other
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CONVERSION OF THREATS TO OPPORTUNITIES
Managing the threats well may convert it into opportunities.
Understanding the danger is one of the ways to turn it into a break. If you know
your risks well, you might be able to formulate different strategies for planning a
good marketing strategy to overpower the existing coffee brands or so that the
product can compete well in the market. To convert the threat into an
opportunity, the plans are implemente after preparation. Some hazards are very
difficult to turn into opportunities like the impact on climate change; the only thing
to do then is create a good backup plan if ever the sudden changes in the climate
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CHAPTER X
SUMMARY
study also intends to investigate the viability of the production of roasted coffee
imports by producing coffee and selling locally. This study also aims to tap into
the increasing number of coffee shops here in Cebu by getting in touch with cafe
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1.1. Technical;
1.2. Marketing;
1.3. Management;
1.4. Financing;
1.6. Financial;
project?
90,000 metric tons of coffee every year and still struggling with meeting demand
for coffee every year. The great demand-supply gap existing is one that the
project hopes to help fill. There is also a growing unemployment rate in the
Another concern is that the standard way of growing coffee is cutting down
forests to grow coffee beans, called the sun-grown method of developing coffee.
damages ecosystems and the environment. This manner clears down trees and
livelihoods of birds and other animals. By destroying birds’ habitats, the food
chain is affected. Pests such as cockroaches and locusts will increase in number
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and target agricultural produce. More pesticide is not the only viable solution as
The basis for this research is the descriptive survey method. An ocular
scan was used to determine coffee shops and skipping over repeating franchise
stores. The target market for the project is on coffee shops located in
Ramos Street, Ayala Mall, SM City Cebu, N. Escario Street and IT Park.
statistical technique used to analyze the survey is the weighted mean method,
multiple choice ranking, and analysis of mutually exclusive choices. This data is
FINDINGS
Technical Aspect
The technical aspect states the necessary materials, equipment, and tools
implement the project, plant location, and layout, production capacity, quality
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The proposed study is about the production and distribution of Arabica
coffee beans to coffee shops located in Cebu City. The necessary materials are
Arabica coffee seedling, fertilizers and water while the equipment and tools
needed are rakes, hulling machine, coffee roaster, baskets, tarpaulins, and
coffee bean sieves. Several processes are done and followed to ensure the
quality if the products. The procedures should begin from the establishment of
the coffee plantation to lay-outing and holing. Next is, transplanting, followed by
care and maintenance, harvesting, processing and then the last is the
Marketing Aspect
The primary target market for this project is coffee shops in Cebu. There
exists a growing demand for coffee shops as international coffee brands are
branching out here in Cebu and the cafe culture is also increasing among
millennials. The main competitors for the product are the coffee imported
Other competitors are farms in the Philippines, which are usually located in
benefit for the project which will help take a portion of the current market share
of coffee. The project will have a projected market share of around 10% of the
Management Aspect
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The proposed structure for the project will be a partnership, with at least
one capitalist partner that will provide the land and one other partner that will
take care of the excess required capital for the business and the affairs of the
trade. The project will employ three farmers for the pre-operating period and
period, the firm will hire five temporary laborers and an in-house roaster. The
farmers earn annually Php 97,500.00 each and laborers paid daily at a minimum
wage. The bookkeeper will be kept on a retainer basis and will be paid Php
Financing Aspect
the project will cost. It also deliberates determining where to acquire materials
shouldering the costs using their funds or entering into loan agreements with
banks. The capitalist partner must shoulder the obligation of land in which he
will also receive a higher part of the profit share. The proponents also
recommend that the partnership borrow money from the Land Bank of the
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Legal and Taxation Aspect
also be secured. Furthermore, the permits and licenses needed are Barangay
Every business has the responsibility to pay its tax requirement and as for
the proposed project involves agricultural product and uses only the simple
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