MODULE 6: 4M’s OF PRODUCTION AND BUSINESS MODEL

PRE-TEST: Directions: Write True if the statement is correct, otherwise write False
if the statement is incorrect on the space provided below.
True 1. Output represents the final products from the production process and
distributed to the customers.
False 2. The 4M’s in the production operation are the materials, manpower,
machine and money.
True 3. Manpower in production operation refers to the workers involved in the
production of goods.
True 4. Product description is the marketing copy that explains what a product is and
its benefits.
True 5. Prototype is a replica of a product.
______6. Product to produce is one of the factors to be considered in the production
method.
True 7. Educational qualifications and experience is one of the criteria in considering
manpower.
False 8. Skills and expertise is not important in considering manpower.
______9. Benefits are the reasons why customers will decide to buy the products.
True 10. Machine refers to the manufacturing equipment.
True 11. Supplier is an entity that supplies goods and services to another
organization.
True 12. Supply chain is a system of organizations, people, activities, data and
properties involved in moving a product or service from supplier or
customer.
True 13. Business model describes the rationale of how an organization makes,
transports, and captures value in economic, social, cultural or other contexts.
True 14. In selecting the type of equipment to purchase, the entrepreneur may
consider cost and capacity of the equipment.
True 15. Value chain is the process or activities by which a company adds cost to
an article, that includes production, promotion, and providing of after-sales
service.

ACTIVITY 1. GUESS THE PICTURE

Direction: Given with the following pictures, fill in the following blanks below
to form a meaningful word. Two (2) points for each correct word.

MANPOWER MACHINES

MATERIALS METHODS
ACTIVITY 2. General Directions: Answer the following questions based on your
learnings about 4M’s of production and Value Chain or Supply Chain. Write your
answer on the space provided. Five (5) points in each correct answer for Problem
No.1 and 2 points for each correct answer in Problem No.2.

Problem No. 1. “In your home, when you want to eat egg sandwich before going to school,
your mother would surely prepare it for you. Your egg sandwich would not be produced
without a process.”

1. Who would be your manpower? Your mother

2. What would be your materials? Eggs and sliced bread
3. What machines or tools would you use?
4. What methods are needed to produce the egg sandwich? (Cooking
procedures- enumerate them).

• First,you need to get 2 pieces of bread

• Put some cheese and a egg
• Spread a mayonnaise (optional)
• Done, you can put it on your lunchbox

Problem No. 2: With the pictures shown below, identify each picture whether it is Value
Chain or Supply Chain.

1. Supply Chain

2. Supply Chain

3. Supply Chain
Assessment

Direction: Encircle the letter of your choice.

1. Which of the following refers to the human workforce involved in the manufacture of
products?
A. Materials B. Method C. Machine D. Manpower
2. The 4M’s of production are as follows except ONE.
A. Management B. Manpower C. Method D. Machine
3. Which of the following refers to the marketing copy that explains what a product is and why
it is worth purchasing?
A. Prototype B. product description C. Business Model D. Suppliers

4. It represents the final products from the production process and distributed to the
customers.
A. Input B. Supplies C. Output D. Materials
5. It is a replica of a product.
A. Prototype C. Business Model
B. Product description D. Suppliers
6. Which of the following refers to the system of organizations, people, activities, information,
and resources involved in moving a product or service from supplier to customer?
A. Supply chain B. Value chain C. Business model D. Prototype
7. Which of the following is the process or activities by which a company adds value to an
article, including production, marketing, and the provision of aftersales service?
A. Supply chain B. Value chain C. Business model D. Prototype
8. It describes the rationale of how an organization creates, delivers, and captures value in
economic, social, cultural or other contexts.
A. Prototype B. Product description C. Business Model D. Suppliers
9. It is an entity that supplies goods and services to another organization.
A. Prototype B. Product description C. Business model D. Suppliers
10. Which of the following refers to the manufacturing equipment used in the production of
goods or delivery of services?
A. Machine B. Manpower C. Method D. Materials
11. It refers to the process or technique of converting raw materials to finished products.
A. Machine B. Manpower C. Method D. Materials
12. It simply refers to the raw materials needed in the production of a product.
A. Machine B. Manpower C. Method D. Materials
13. Statement I- Skills and expertise is not important in considering manpower. Statement II-
Benefits are the reasons why customers will decide to buy the products.
A. Only Statement I is true. C. Both Statements are true.
B. Only Statement II is true. D. Both Statements are false.
14. Statement I- Educational qualifications and experience is one of the criteria in
considering manpower.
Statement II- Product to produce is one of the factors to be considered in method or
production method.
A. Only Statement I is true. C. Both Statements are true.
B. Only Statement II is true. D. Both Statements are false.
15. Statement I- In selecting the type of equipment to purchase, the entrepreneur may
consider cost and capacity of the equipment.
Statement II- The purpose of a product description is to supply customers through details
around the features and benefits of the product.
A. Only Statement I is true. C. Both Statements are true.
B. Only Statement II is true. D. Both Statements are false.
 MODULE 7: FORECASTING REVENUES AND COSTS
Encircle the letter that bests correspond to your answer.
1. Refers to the amount added to the cost of a product to determine the selling price –
a. Revenue b. Cost c. Mark Up d. Mark Down
2. Aling Marta sells bibingka in her neighbourhood, every day she can sell 45 pieces of bibingka
at 20 pesos each. How much is her daily revenue?
a. 900.00 b. 450.00 c. 800.00 d. 1000.00
3. It is a planning tool that helps entrepreneur copes up with uncertainties in the future operation
of the business.
a. Revenue b. Selling c. Benchmarking d. Forecasting
4. The selling price of an item or merchandise is computed by adding cost per unit and
__________?
a. Revenue b. Mark Up c. Discount d. Number of Items
5. Mang Berting is a fruit vendor selling at the local public market. He gets his mangoes from a
supplier at 25 pesos per kilo and sells it at 45 per kilo to his customers. How much mark-up
was Mang Berting adding to his selling price?
a. 25.00 b. 30.00 c. 15.00 d. 20.00
6. Aling Elvie sells t-shirt at 175.00 pesos each. If each t-shirt costs 135.00 pesos, How much is
the mark-up?
a. 30.00 b. 45.00 c. 40.00 d. 50.00
7. It is the result when sales exceed the cost to produce goods or render services -
a. Forecasting b. Selling c. Revenue d. Benchmarking
8. It is a tool that allows managers to make educated estimates on revenue and costs of the
business in order to cope up with uncertainties of the future –
a. Estimating b. Guessing c. Forecasting d. Benchmarking
9. Refers to goods and merchandise at the beginning of operation of business or accounting
period.
a. Merchandise Inventory, end c. Expenses
b. Merchandise Inventory, beginning d. Freight-in
10. Mang Lito sold 5 pairs of slippers. Suppose Mang Lito purchased the 5 pairs of slippers at P
30.00 each and pays P120.00 freight. Calculate how much is the cost of goods sold?
a. 220.00 b. 420.00 c. 270.00 d. 200.00
11. Refers to amount paid to transport goods or merchandise purchased from the supplier to the
buyer.
a. Merchandise Inventory, end c. Expenses
b. Merchandise Inventory, beginning d. Freight-in
12. Costs incurred through payment of utilities such as electricity and water -
a. Revenue c. Mark-up
b. Operating expenses d. Free
13. Merchandise or goods purchased are referred to as –
a. Purchases c. Costs
b. Operating Expenses d. Loss
14. It is the result when cost to produce goods or render services is greater than the sales –
a. Selling b. Revenue c. Benchmarking d. Loss
15. Jean purchased 5 baskets for P 30.00 each. According to her calculation, P 10.00 shall be
added to the cost as mark-up. How much is the selling price of each basket?
a. 35.00 b. 40.00 c. 50.00 d. 60.00

After learning the calculations presented, you can now compute the projected revenue by day,
month and year based on your business concept.
Aling Minda is operating a buy and sell business, she sells broomsticks (walis tingting) in her
stall at a local market. She gets her broomsticks from a local supplier for 25 pesos each. She then adds 50
percent mark-up on each broomstick.
Every day, aling Minda can sell 30 broomsticks a day.
Use the template below and fill in the necessary figures based on the scenario. Remember to
use the factors to consider in projecting revenues and refer to tables 1, 2 and 3 as your guide.

Table 1
Projected Daily Revenue
Name of Business MINDA’S LOCAL BROOMSTICKS
 Merchandise/ Cost per Mark-up Selling Projected Projected
Products Unit ____% Price Volume Revenue
(A) (B) (C) (D) (E)
Average No. of
Items
(Daily)
Sold (Daily)
(A) (B)= (A x (C)= (A+B) (D) (E) =(C x D)
.50)
Broomsticks 25.00 12.5 37.5 30 1,125.00

Total 25.00 12.5 37.5 30 1,125.00

Use the calculations you have made in Table 1 to successfully complete the information in
Tables 2 and 3 and calculate the projected monthly and yearly revenue of Aling Minda’s business.

Table 2
Projected Monthly and Yearly Revenue
Name of Business MINDA’S LOCAL BROOMSTICKS
Merchandise/ Selling Projected Projecte d Projected Projected
Products Price Volume Revenue Volume Revenue
Average No. of Average No. of
Items Sold Items Sold
(Monthly) (Yearly)
(Monthly) (Yearly)

(C)= F= (D x 30 days) G= (C x F) H= (D x 365 days) I= (C x H)

(A+B)

Broomsticks 37.5 900.00 33,750.00 10,950.00 410,625.00

Total 37.5 900.00 33,750.00 10,950.00 410,625.00

For Table 3, use the following assumed increases in sales every month. From January to May, 5 percent
increase from previous sales. For the month of June, 10 percent increase from previous sales. For the
months July to December, record the same sales every month.

Table 3
Projected Monthly Revenue
Name of Business MINDA’S LOCAL BROOMSTICKS
Month January February March April May June
Revenue 33,750.00 35,437.05 37,209.40 39,069.87 41,023.36 45,125.70

Month July August September October November December

Revenue 45,125.70 45,125.70 45,125.70 45,125.70 45,125.70 45,125.70

Have you tried recording the amount of money you spend from your daily allowance? You might be
experiencing difficulties in making your allowance meet your daily needs as student. Try to fill in the information
below to come up with a breakdown of your daily allowance.

Breakdown on Daily Allowance

Name: Dranreb RJ A. Madrazo
 Daily Allowance: Ᵽ 50.00
Less: Daily Expenses
Food Ᵽ20.00
Fare Ᵽ 14.00
School Supplies Ᵽ 6.00
Recreation Ᵽ5.00
Others Ᵽ5.00 Ᵽ5.00
Total Ᵽ 50.00

Now, that you have finished the module, let us check what you have learned. Answer the
questions given below by encircling the letter of the correct answer.
1. Profit or Loss in computed by subtracting cost / expenses from –
a. Income/Revenue c. Sales
b. Sales Discount d. Operating expenses
2. Sales is an account title used to describe goods or merchandise sold by a business. What nature
of business uses Sales?
a. Servicing c. Merchandising
b. Barber Shop d. Both Servicing and Merchandising
3. Irene sells fashion bags online. She gets each bag for P 150.00 from a local supplier. She then
adds P 100.00 as mark-up for each bag. How much is the selling price of each bag?
a. P 200.00 b. P 250.00 c. P 300.00 d. P 350.00
4. A merchandising business earns through –
a. Rendering services c. Donating products
b. Lending money d. Buys and sells goods
5. It is a tool that allows managers to make educated estimates on revenue and costs of the business
in order to cope up with uncertainties of the future –
a. Estimating b. Guessing c. Forecasting d. Benchmarking
6. Which of the following businesses use Service Income in recording revenues?
a. Beauty Salon b. Sari-sari store c. Movie House d. Hardware
7. Refers to the amount of merchandise or goods sold by the business for a given period of time –
a. Operating Expense c. Deductions
b. Cost of Goods Sold d. Sales
8. Aling Coring sold 5 pieces of rugs. She bought the rugs for 20 pesos and sold it for 35 pesos. How
much is the total cost of goods sold?
a. P 80.00 b. P 90.00 c. P 100.00 d. P 110.00
9. Freight-in refers to the amount paid to transfer goods or merchandise purchased from the
_________.
a. Buyer to the supplier c. Buyer to buyer
b. Supplier to the buyer d. Supplier to supplier
10. The costs incurred through payment of utilities such as water, electricity, internet connection is
considered as –
a. Costs c. Operating expenses
b. Purchases d. Personal Expense of the owner
11. Nathaniel sells bottled water in a nearby city bus terminal. Every day he can sell 30 pieces of
bottled water at 20 pesos each. How much is Nathaniel’ daily sales?
a. P 900.00 b. P 800.00 c. P 700.00 d. P 600.00
12. The amount added to the cost of a product to determine the selling price is called –
a. Mark-up b. Discount c. Mark-down d. Sale
13. Lina sold all ten t-shirts for 1,500.00 pesos. Suppose she added 50.00 pesos as mark-up price for
every t-shirt. How much was the cost for every t-shirt sold?
a. P 80.00 b. P 90.00 c. P 100.00 d. P 110.00
14. Refers to goods and merchandise left at the end of operation or accounting period.
a. Merchandise inventory, beginning c. Freight-in
b. Merchandise inventory, end d. Freight-out
15. The Total Cost and Expenses is calculated by –
a. Adding cost and expenses c. Adding revenue and expense
b. Subtracting expenses from costs d. Subtracting expense from revenue
 Let us see what you already know about forecasting revenues and costs.
Answer the questions below.
Write True if the statement is correct & write False if you think the answer is not correct.
True 1. The gross profit rate of the entrepreneurial venture is computed by dividing the cost of goods sold
by net sales.
____ True 2. The gross profit rate provides information on the cost ratio of the business.
_____ True3. In evaluating the profitability of the entrepreneurial venture the evaluation must focus on the
information reflected on the face of the balance sheet.
_____ True 4. The operating profit margin rate indicates information on the percentage of operating expenses on
the net sales.
True 5. Mr. Q is a practicing Doctor of Medicine. During the month of March 2019 he received
Professional Fees amounting to P 1,000,000 and total expenses of P250,000. The net income of Mr. Q is P
750,000.
____ False 6. Profit is the money received from customer in exchange of products given to customer.
True 7. The gross profit rate of the entrepreneurial venture is computed by dividing the cost of goods sold by
net sales.
__True 8.. The gross profit rate provides information on the cost ratio of business.
___True9. One of the objectives in evaluating the gross profit rate of the business is to determine whether
the amount of the gross profit is sufficient to cover the operating expenses.
__ True10. The operating profit margin rate indicates information on the percentage of operating expenses to net
sales.
___False 11 The government is not interested in financial statements since it is not a party to any of the
transactions of the business.
__ True12. The net profit margin rate presents the general perspective of the operating performance of the
business.
___False13. The amount of income per peso investment can be determined by computing the net profit margin
rate.
___ True14. In normal situation, it is favorable for the business to have high inventory
____ True 15. Preparation & presentation of the financial statements of the entity is the primary responsibility of
an accountant.

Read and understand the given problem.

Rodrigo is engaged in a buy-and sell business of perfumes. He bought 10 boxes of perfumes. Each box
costs 12,000.00 and contains a dozens of perfume bottles. He is planning to sell one perfume bottle at P1,500.
What is his expected profit on the 10 boxes of perfumes?
The ultimate goal of any business whether a retail or wholesale is to earn a profit. Getting the difference
between the amount of money earned from the selling 10 boxes containing a dozen of perfume bottles and the
cost of those 10 boxes gives the profit.

In the example that I gave, answer the following questions:

1. How much does Rodrigo earned profit? P60,000.00
2. Is it good to engage in a business? Yes or No? Yes, because you can earn a profit on selling your product by
adding Mark up to get a revenue.
3. What do you think of Rodrigo’s business? Is it good for a beginner? I think Rodrigo’s business is unique
and it is so easy to manage it. Yes, because he can manage to get a profit by adding a Mark up so that he
can get revenue every day.
Activity 1.2: Answer the given problem.
1. Annie bought one dozen smartphones for P200,000.00 with a discount of 5%. She sold half dozen at a
price of P18,000.00 per unit. However, a new model of smartphone became available in the market, so
she sold the remaining half dozen @ P12,000.00 each unit. What was her profit or loss?
Compute the following requirements:
a. Gross profit rate

Net Sales P 190, 000.00

Less: Cost of Sales P 108, 000.00
Gross Profit P 82,000.00

Gross Profit

gross profit rate = 82,000.00

190,000.00 X100

gross profit rate= 43.16%

b. Operating profit margin rate

Gross profit P 82,000.00

Less: Operating expenses P 72,000.00
Operating profit margin P 10,000.00

Operating profit Margin rate

Operating profit Margin rate= 10,000.00(O.P.M)

192,000.00(Net Sales) X100

Operating profit Margin rate =5.26%

c. Net profit margin rate

Operating profit margin P10,000.00

Less: Income tax P 6,000.00
Net profit margin P4,000.00

Net profit margin rate= Net profit

Net Sales

4,000.00
190,000.00 x100

Net Profit Rate=2.11%

d. Return on Investment

Table 1
Projected in 2 months balance
Smartphone Selling Business
 Week 1 Week 2

Assets

Cash 10,000.00 20,000.00

Total Assets 10,000.00 20,000.00

Table 1
Projected statement
Smartphones Selling Business
Week 1 Week 2

Revenue 190,000.00 190,000.00

Cost 180,000.00 180,000.00

Gross Profit Before Tax 10,000.00 10,000.00

Return of Investment = Net Income

Average total assets

Return of Investment = 10,000.00

20,000.00
Return of Investment=0.5/5%

The Monthly and cost is assumed increased at 5%

Now ask yourself the following questions:

1. Is creativity present in the operation of ordinary small businesses along the streets and
highways and in your neighborhood? Why do you say so?
I think no because some of the businesses in our purok are just imitating the other
store. There is no creativity and just copying the idea of others.

2. Will you consider the daily business practices of the small owner within the concept of
entrepreneurship? Why?
Yes, because the concept of entrepreneurship is Important in having a good plan and
establish a manuscript for your business.

Assessment

How did you understand the lessons that you have studied in this module?
Answer the following questions.

Write True if the statement is correct & write False if you think the answer is not correct.
___ True1. The gross profit rate of the entrepreneurial venture is computed by dividing the cost of goods sold by
net sales.
____ True 2. The gross profit rate provides information on the cost ratio of the business.
____ True 3. In evaluating the profitability of the entrepreneurial venture the evaluation must focus on the
information reflected on the face of the balance sheet.
____ True 4. The operating profit margin rate indicates information on the percentage of operating expenses on
the net sales.
____ True 5. Mr. Q is a practicing Doctor of Medicine. During the month of March 2019 he received
Professional Fees amounting to P 1,000,000 and total expenses of P250,000. The net income of Mr. Q is P
750,000.
____ False 6. Profit is the money received from customer in exchange of products given to customer.
____ True 7. The gross profit rate of the entrepreneurial venture is computed by dividing the cost of goods sold
by net sales.
____True 8. The gross profit rate provides information on the cost ratio of business.
 ____ True 9. One of the objectives in evaluating the gross profit rate of the business is determine whether
the amount of the gross profit is sufficient to cover the operating expenses.
____ True 10. The operating profit margin rate indicates information on the percentage of operating expenses to
net sales.
___ False11. The government is not interested in financial statements since it is not a party to any of the
transactions of the business.
___ True 12. The net profit margin rate presents the general perspective of the operating performance of the
business.
____ False13. The amount of income per peso investment can be determined by computing the net profit margin
rate.
_____ True 14. In normal situation, it is favorable for the business to have high inventory
____ True 15. Preparation & presentation of the financial statements of the entity is the primary responsibility of
an accountant.

After learning how to compute the gross profit at least you have learned now how to do it by your own.
Solve and compute the following:
1. A watch store owner decided to offer 20% discount for a particular brand of watch that sells at
P35,000.00. By doing so, his average sales increased from 5 watches to 12 watches a day. If he bought
one watch at a price of P22,000.00 from the supplier, by how much was his daily profit increased or
decreased by offering such discount on the watch?

Net sale=35,000.00 Discount=20%

Net sale= 28,000.00
Gross profit= 7,000.00 Markdown

Cost of sale = 26,400.00

22,000.00
Gross profit= 4,440.00 Mark Up

; Therefore assuming that across profit is increasing for 20% and also it will increase the sale of product
12-18

2. Michelle went to Baguio and bought 20 jars of strawberry jam for P3,500.00 with 1 5% discount. When
she got back to Manila, she sold 10 of the jars for a total of P1,800.00and the rest as P185.00 each.
How much profit did Michelle again?

20 jar=3,500.00 Discount=15%
Net sales= 2,975.00
Grossprofit=525.00 Markdown

1st for 10 jar 185 each = 10x185

Grossprofit 10 jar = 1,850.00 Markup
;Michelle profit gain increased each to 3% to sale the jar.