PROJECT FEASIBILITY STUDY

TABLE OF CONTENTS

I. EXECUTIVE SUMMARY

II. PROJECT BACKGROUND AND HISTORY

III. ECONOMIC ASPECT

1. DEMAND AND MARKET

2. SALES FORECAST AND MARKETING

IV. TECHNICAL ASPECT

1. PRODUCTION

2. DETERMINATION OF PLANT CAPACITY

3. MATERIAL INPUTS

4. PROJECT ENGINEERING
 A. PRELIMINARY DETERMINATION OF SCOPE OF THE PROJECT

B. TECHNOLOGIES, PROCESSES AND EQUIPMENT

C. CIVIL ENGINEERING WORKS

V. MANAGEMENT

VI. MANPOWER

VII. FINANCIAL ASPECT

TOTAL INVESTMENT COST

1. WORKING CAPITAL REQUIREMENT

2. FIXED ASSET

3. INVESTMENT COSTS

4. FINANCIAL PROJECTIONS

PROJECTED INCOME STATEMENT

PROJECTED BALANCE SHEET

PROJECTED CASH FLOW STATEMENTS

PRODUCTION COST AND EXPENSES

PROJECT FINANCING
 FINANCIAL EVALUATION

VIII. SOCIAL DESIRABILITY ASPECT

APPENDICES
I. EXECUTIVE SUMMARY

Mr. Edward Acong, Sole Proprietor and General Manager of Acong’s Home Bake

Products has requested our Consulting Firm to conduct a Project Feasibility on a

proposed project of establishing a Chocolate Manufacturing Business in Sulat, Eastern

Samar. The planned location of the proposed project is at Brgy. Maytigbao, Sulat,

Eastern Samar. The proposal is focusd on production of chocolate confectionery which

refers to pre-packed chocolate bars, bites and candies made primarily from cocoa

powder and/or butter, mixed with milk and sugar.

The planned chocolate manufacturing firm will be another line of business of

Acong’s Homebake Products. Acong’s Homebake Products is a merchandising

business with perishable cake and baked products as their primary product. Mr. Edward

Acong would like to add a new line of business which is a Chocolate Manufacturing and

hired our services to determine the feasibility of the proposed project.

Project Feasibility Team is composed of five (5) members. These members will

work hand in hand to obtain the relevant data and information necessary to assess the

profitability and viability of the project.

The team were able to come up with some assumptions that we thought would

be true regarding this project.

 1. Since chocolates in general are widely famous and patronized by people

in all class, we assumed that the project would be feasible.

2. There is a large demand of chocolates locally.

3. The business will break even or generate a little income on its first year of

operations.

4. Chocolates are hard to manufacture.

5. Cost of production is high.

6. There would be a big impact on the community especially on the

economic aspect.

In order to know whether all our assumptions are correct, we conducted series of

activities to corroborate this assumptions.

II. PROJECT BACKGROUND AND HISTORY

Name Project Promoter: DIEGO’S HOMEBAKE PRODUCTS

Address of Pomoter: Center Island, San Vicente City,

Project Orientation:

Proposal on establishing of the 1st Manufacturing of Chocolate Business in

Maytigbao, Sulat, Eastern Samar with the use of cocoa beans coming from cacao plant.

Chocolate, derived from the Aztec (Central America) word xocoatl (cocoa-based drink),

is made from the fruit of the cocoa (Theobroma cacao) tree. Columbus first brought

cocoa beans to Europe out of curiosity. Today, it is one of the most exotic foods the

whole world enjoys.

Chocolate confectionery refers to pre-packed chocolate bars, bites and candies

made primarily from cocoa powder and/or butter, mixed with milk and sugar.

Market Orientation:

Planned distribution of the manufactured chocolates would be domestic,

particularly in local places, such as Sulat, San Julian,Taft. Target Market includes

individuals with age ranging from 11 to 60 years old. We opted to include in our target

market the kids and the senior citizens because normally kids like chocolates a lot. The

senior citizens on the other hand, though may not buy chocolates for themselves, may

patronize the product as gifts or “pasalubong” to their grandchildren.

III. ECONOMIC ASPECT

1. Demand and Market

In the Asia Pacific region, chocolate sales are estimated at $3.9 billion. The

Philippines accounts for less than 3% ($111 million) of the total (Van Melle, Phils.,

1998). These already included sales in duty-free shops.

Moreover, in the 1997 Family Income and Expenditure Survey, spending on

chocolates and candies reached P3 billion with regular buyers from middle to high-

income urban families. The purchases usually surge during the holiday (i.e. Christmas)

season.

Imports of chocolate confectionery were volatile during 1996 to 2000, peaking at

5,810 tons ($24.2 million) in 1997 and lowest at 3,670 tons ($15 million) in 2000.

Philippine Trade of Chocolate Confectionery, 1996-2000

(Volume in tons, Value in US$'000 - FOB for exports, CIF for imports)
IMPORTS EXPORTS
Year Volume Value Volume Value
1996 4,035 11,696 1,411 4,485
1997 5,810 24,200 1,356 4,273
1998 3,767 14,452 1,265 3,903
1999 5,542 20,060 161 524
2000 3,673 15,025 315 898

SOURCE: National Statistics Office

The US was the major source in 2000 with a 60% volume share. Other sources
were Australia and Malaysia.
 These are the historical data in relation to the proposed project domestically and
abroad. As of now, there are no actual data that can be shown with regards to our local
market here in San Vicente since there has never been any manufacturing business in
the city to date.

But to support some of our estimates in determining the demand, the team
conducted some surveys and inquiries. These include the giving of questionnaires,
interviewing sales staff and inventory in charge, and researching on the internet.

Our surveys acquired information about some of the important questions with
regards to the project. One of these questions is a tool in determining the demand of
chocolates that will be manufactured in San Vicente. This particular question is, Are you
willing to buy locally manufactured or San Vicente- made chocolates? Out of the 300
chosen correspondents, only 278 answered seriously the question. There are 86% or
238 respondents answered ‘Yes”. The result was used to determine the demand by
multiplying 86% of the population of the target areas which is 185,757. We were able
to get an estimate demand of 159,751. In this note, the team is able to know that there
is a favorable demand of the proposed product.

However this information may be hypothetical and may not be totally relied
upon. So, we used the data we researched on the internet about the chocolate sales in
the Philippines on the year 2000 which is US$111 Million. We also used the census data
of National Statistics Office that shows the population of the Philippines and the City of
San Vicente and Municipalities of Masamo, San Juan and San Martin, Northern Cadiz.
We extract the ratio of the population these for areas to the whole population of the
Philppines and multiplied it with the 2000 Chocolate sales in the Philippines. The
computation can be seen below:

Chocolate Sales in Philippines 4,551,000,000.0

(US$111MXP41) P 0

Target Areas
71,1
Sulat 05
32,9
San Julian 74
51,4
Maytigbao 62
30,2
Taft 16
185,7
Total population of the target Areas (a) 57
(b 76,498,73
Total Philippine Population ) 5
Ratio [ (a) / (b)] 0.24%
Estimated Demand of Target Areas in Pesos P 11,050,903.
 09

With the above data, we were able to get an estimated demand in pesos. It is
also and ideal to get the demand in quantity. But basing on the data, it would be
improper for us to do so, because there is no exact information regarding the price
ranges composing these demand in pesos. And this figure does not represent
specifically the target market that the proposed project planned to cater. The target
market is determined to be individuals with ages ranging from 11 to 60 years old. But
this data already give an answer as to whether there is a favorable existing demand of
chocolates which is the primary product of the proposed project.

2. Sales Forecast and Marketing

The anticipated competition are usually the US-imported chocolates in the

market that include Hershey's Kisses, M&M milk chocolates and peanuts, Mars, Three
Musketeers, Snickers, Milky Way, and Babyruth. Imports from Australia and Switzerland
are Cadbury and Lindt and Toblerone, respectively. Also in the market are Malaysian
products such as Van Houten, Gandour's Pik-One and Sahara. Those from Saudi Arabia
include Tofiluk, Safari and Soudan.

In the Philippines our key players are Universal Robina Corp. One of the largest
and leading food companies in the country. URC Branded Consumers Foods Division
manufactures and distributes chocolates along with its instant coffee products, snack
foods, candies, biscuits and ready-to drink beverages. Commonwealth Foods, Inc.
About 60% of sales come from Manila and the remaining from the provinces. Serg's
Products, Inc., the country's oldest and Southeast Asia's first modern chocolate
confectionery manufacturer. At present, its chocolate processing plant has a capacity of
7 tons/day. Goya, Inc. Formerly the Philippine Cocoa Corporation, it is now a subsidiary
of Nestle Phils. Inc. It manages the confectionery business of the latter since 1997. It
has a wide target market and offers varied products, both imported and local.

However, there exist an issue and a key concern which is the high input costs,
i.e., sugar and cocoa beans, which are imported, and packaging materials. The industry
heavily relies on imports since supply is scant. The increasing influx of imported
chocolates is also a growing challenge to the local industry. Further, these are
aggravated by poor transport infrastructure, which raises logistic costs. In a country
with relatively low incomes, these can dramatically affect demand.

In order to address these concerns, the industry must improve product quality
through product development, new investment and increase in production efficiency.
Thus far, there have been efforts to adopt computer aided-design and -manufacturing
processes including bar coding, thus, enhancing productivity.

One of the competitive edges of the local manufacturers is the ability to cater to
the large low-income segment (about 70% of the 15 million households) with low-
priced retail packs. Thus, expanding product lines, improving distribution networks
along with the growing young population will drive demand in the years to come.
However, growth will be moderate in the next five years due to slow economic growth.
At the same time, the industry competition will continue to be intense.

The planned sales promotion for the product would include a variety of means
such as free taste activities, advertising on televisions such as San Vicente Cable
Television, Radio broadcasting on DYDM and publications in different newspapers in the
province. Our promotional activities will also include distribution of flyers and posters.

The project forecasted a P 362,686.31 estimated annual sales revenues and an

estimated annual cost of sales promotion and marketing of P 159,000.00.
IV. TECHNICAL ASPECT

2. Production

A. Product and By- Products

The proposed project intends to produce the chocolate bars products in

Maytigbao, Sulat, Eastern Samar with of the same quality with that of top selling
chocolate brands in the Philippines and all over the world. The project plans to
produce 100,000 units of chocolate bars in their first year of operations.

Along with the production of chocolates, a very useful by-product is

consequently created. These by-products are the shells of the cacao seeds which
can be sold as animal feeds.

B. Waste Disposal

It is estimated that the amount of waste generated in manufacturing of

chocolates is of minimal and tolerable amount and the cost would only be at a
maximum of P50,000 annually. The wastes determined are the shells that are already
damaged and cannot be sold as animal feeds and the bottles of milk used in the
production.

2. Determination of Plant Capacity

 The proposed project intends to use a 800 square meters plant area catering the
different areas in production including a warehouse in which raw materials are stored
and another storage room in which finished products will be placed. This plant area
houses different types of equipment, machines and facilities used in production. The
plant is well- equipped and sufficiently ready to cater all the necessary processes and
procedures that is inherent in manufacturing of chocolates.

3. Material Inputs

a. Raw Materials

The basic raw material that is very important in the production of chocolates
is the cacao bean. This must come in sacks of cacao beans to make chocolate
products. Cacao beans are very important in chocolate making process because
from these beans arise chocolate butter and chocolate liquor which are the main
ingredients in making chocolates.

b. Ingredients/Components

One of the ingredients is milk which can be a whole milk. The choice of what
type of milk to be used is up to the manufacturer. The next one is sugar. Butter and
Vanilla and different kinds of nuts can be added to make different flavors and variety of
chocolate products.

c. Auxiliary Materials

Custom-made packaging materials, company- named cartons, boxes and cases,

are among the auxiliary materials that the plant maintains.

d. Factory Supplies

Included in our factory supplies are the production suits, gloves, hair-caps,
boots, lab gowns, towels, face-masks, trays, productions utensils such as spatulas,
rubbers scrapers, chairs, tables, lockers, hand sanitizers, toiletries, drinking mineral
water and paper towels.

e. Utilities
 The plant will already have Electrical Connection with independent transformer,
Water Connection, Landline Telephone Connection and Internet Broadband Connection
at the plant manager’s office.

4. Project Engineering

A. Preliminary Determination of Scope of the Project

The proposed project is mainly concerned in the manufacturing of chocolates

which will be sold in the Municipalities of Sulat, Taft, San Julian. Though, it is been
specified that the above- mentioned places are the target area for the project’s selling
activities, the project is open for other places that will patronize the product.

Chocolates are very popular and marketable to the customers due to its
extraordinary taste. The combination of bitterness and sweetness gives the product a
more interesting characteristic. Almost all people know what is chocolate. But, only few
people know how it is made.

How to Make Chocolates

The first cacao trees grew wild in the Amazon basins in north Brazil. Today cacao
is cultivated in tropical climates. The cacao tree likes climates within 10 to 20 degrees
of the Equator. The trees need warm, humid weather and loose rich soil. They also like
shaded sunlight with little or no wind. The largest growers of the cacao tree are Brazil,
Ghana, the Ivory Coast, and Nigeria. There are 20 to 60 cacao beans inside the pod.

Three main varieties of cacao beans are grown today. The criollo bean is a native
of Central America. Approximately 10 to 15 percent of the cacao trees are criollo. These
trees are small and hard to grow. The forastero cacao is much easier to grow and
makes of 70 percent of all cacao grown. The forastero is more bitter than the criollo.
The third type of cacao bean is the trinitario. It is a cross between the criollo and the
forastero. About twenty percent of the cacao beans produced are forastero.

Although cacao trees grow about sixty feet in the wild, plantation owners trim
them to about 20 feet so that workers can reach the pods at harvest time. Since the
cacao tree prefers shade banana trees, rubber trees, or coconut palms are planted
beside the cacao tree in the orchard.

The pods take five to six months to develop. When the pods ripen they turn
from green or yellow to orange or red. Cacao trees can be harvested twice a year.
Workers use a machete to cut the pods off the trees. They are placed on banana leaves
in large wooden boxes. They are left to ferment for several days. Criollo beans usually
ferment for two to three days while forastero and trinitario beans ferment three to
seven days. During fermentation the beans become darker and wrinkled and lose their
bitter taste.

After fermentation the beans are sun-dried for several days. They are then
packed in burlap sacks and shipped to factories. When the beans arrive at the chocolate
factory they are sorted and cleaned. The beans are roasted at 250 to 350° degrees for
thirty minutes to two hours depending on the type of bean. They are roasted in large
revolving drums. The cacao beans give off a wonderful aroma during the roasting
process.

After roasting the beans are winnowed. This is the process that removes the
outer shell. The shells are sold as animal feed. The inner nib is then crushed then
heated to melt the cocoa butter and ground to a thick paste. This paste is called
chocolate liquor, but contains no alcohol.

If the nibs are to become Dutch-processed cocoa they are treated with an alkali.
If left untreated with alkali the chocolate liquor becomes cocoa powder. To make cocoa
power a large press extracts all but 10 to 25 percent the cocoa butter from the
chocolate liquor. The remaining cake is then ground and sifted through fine nylon, silk,
or wire mesh. Low fat cocoa contains between 10 to 13 percent fat where high-fat
contains 15 to 25 percent. Low-fat cocoa is usually used for cocoa drinks. The high-fat
cocoa is used to flavor desserts.

To make unsweetened or "baking" chocolate the chocolate liquor is molded and

solidified. Dark chocolate is made by combining chocolate liquor with sugar, cocoa
butter, and vanilla. To make milk chocolate, chocolate liquor is combined with cocoa
butter, sugar, and milk solids or powder. White chocolate is made without chocolate
liquor. It is the cocoa butter that gives it the chocolate flavor. Dipping chocolate is
made with more cocoa butter than regular eating chocolate.
 Chocolate is mixed with 0.3 to 0.5 lecithin. This helps it mix more easily and
makes the chocolate smoother. Another type of chocolate is gianduia. It is a blend of
chocolate and roasted hazelnuts.

Once the ingredients are combined the chocolate mixture goes through a refining
process. It is kneaded between large steel rollers. This make the mixture smooth. Next
is it conched. During this process the liquid mixtures is heated and continuously mixed,
ground, and stirred. High quality chocolate is conched for several days and lower
quality chocolate are conched for only a few hours.

After conched the chocolate is tempered. This is the process that gradually raises
then lowers and raises the temperature to a “set degrees”. Now the chocolate is ready
to be molded into chocolate bars.

B. Technologies, Processes and Equipment

In touring a chocolate factory, one is particularly impressed by the close controls

maintained throughout operations. Work is carried out in an atmosphere of scientific
exactness and nothing is left to chance.

Precision instruments regulate temperatures, stabilize the moisture content of

the air, and control the time intervals of manufacturing operations and other items
necessary to achieve quality results.

The equipment of a factory is heavy, massive and complex. Often representing

an investment of many millions of dollars, there are literally tons of equipment that the
cocoa beans must pass through on their way to becoming chocolate.

Automation

Besides the equipment already described, the industry employs a number of

fascinating machines to do the work of shaping and packaging chocolate into the
familiar forms that we see every day on store counters. Some of the shaping machines
perform at amazing speeds, squirting out jets of chocolate that solidify into special
shapes at a rate of several hundred a minute. Other machines do a complete job of
wrapping and packaging at speeds which human hands would find impossible.

Separate from the chocolate industry but of interest nonetheless, is the enrober-
a machine employed by many candy manufactures in the creation of assorted
chocolates. The enrober receives lines of assorted centers (nuts, nougats, fruit or
whatever desired filling) and showers them with a waterfall of liquid chocolate. This
generally covers and surrounds each center with a blanket of chocolate. Yet other
confectionery machines create a hallow-molded shell of chocolate which is then filled
with a soft or liquid center before the bottom is sealed with chocolate.

The mechanized nature of the entire chocolate-making process contributes

greatly to the industry's high standards of hygiene and sanitation. To keep check on
these standards, chocolate factories constantly run quality tests, which show whether
the process is proceeding within the strict limitations designed for each product. These
tests cover an amazing range-there are tests for the viscosity of chocolate, for the
cocoa butter content, for acidity, for the fineness of a product and, of course, tests for
purity and taste of the desired finished product.

All chocolate manufacturers, it is important to note, must meet the standards as

set forth in the rules and regulations of The Food and Drug Administration and BFAD.
These govern manufacturing formulas, even to the extent of specifying the minimum
content of the chocolate liquor and milk used. They also impose strict rules regarding
the flavorings and other ingredients that may be used.

Secrecy

Where methods of manufacturing are concerned; however, manufacturers have

a completely free hand and have developed individual variations from the "pattern."
Each manufacturer seeks to protect his own methods by conducting certain operations
under an atmosphere of secrecy. Modern technology, in this respect, is reminiscent of
the day of the Spanish monopoly.

Today's "secrets," unlike those of old, include many small but important details
which center around key manufacturing operations. No chef guards his favorite recipes
more zealously than the chocolate manufacturer guards his formulas for blending beans
or the time intervals he gives to his conching. Time intervals, temperatures and
proportions of ingredients are three critical factors that no company wants to divulge.

In line with this, the proposed project also observes the same manner of secrecy
regarding its own formulas and manners of making its own chocolates.

Sanitation

A visit to a chocolate factory certainly will not reveal any secrets; however, the
visitor will be impressed by the gleaming appearance that such a place has. Chocolate
manufacturers conduct all operations under sanitary, laboratory-like conditions in
keeping with the purity of the products they make. They follow a daily regimen of
machine maintenance and general housekeeping that is not exceeded in the food
industry.

Cleanliness is, indeed, the universal byword of the chocolate industry. Chocolate
factories not only have careful programs for industrial sanitation and for the personal
hygiene of their employees, but they are continually striving to improve their programs.

A Plant within a Plant

Technicians use laboratories to analyze every phase of chocolate preparation-

from raw materials to finished products. They test samples for the market as well as
experimental products produced in a company's pilot plants.

These pilot plants consist of miniature equipment which duplicates a company's

entire chocolate making process and those of some of their customers, as well as
providing sample quantities of any product desired. Chocolate manufacturers are
making increasing use of pilot plants in conjunction with their laboratory research
programs to develop interesting new products and find new ways of making the old
ones.

1. Proposed Equipment

Production Equipment

1. Roasting Equipment 5. Refining Equipment

2. Winnowing Machine 6. Conching machine
3. Milling Machine 7.Tempering Equipment
4. Pressing Equipment 8. Moulding Machine

Auxiliary Equipment

1. Giant Exhaust Fans

2. Cooling Machine (like freezer) for Maintaining the Temperature of Storage
3. Srollers

Service Equipment
 1. Delivery Truck

2. Rough Estimate of Investment Cost on Equipment

The company is expected to spend a total amount of P 1,700,000 for the

acquisition of the necessary equipments for the proposed project. Shown below is the
cost of each classification of equipments:

1. Production Equipment - P 1,300,000.00

2. Auxiliary Equipment - P 200,000.00
3. Service Equipments - P 200,000.00

C. Civil Engineering Works

1. Rough Layout of Plant Area

LOOR PLAN OF THE 800 SQUARE METER PLANT
/BUILDING

40 sq.
m
 2. Rough Estimate of Investment Cost of Civil Engineering Works

The place of production is located at National highway, brgy. Maytigbao, Sulat ,

Eastern Samar. The proponent of this project owns a 1,000 square meter area lot. It is
been planned to erect a building of 800 square meters floor area. Shown below are the
site preparation and estimated construction materials with a rough estimates on their
costs.

1. EARTHWORKS

36 cubic meter Bask Fill P 12,600.00

10 cubic meter Gravel Fill 3,500.00
Subtotal 16,100.00

2. Concrete/Masonry Works:

195 bags Portland cement 35,100.00

22 cubic meter fine sand 8,800.00
20 cubic meter gravel ¾ 11,000.00
120 pieces 12mm & Bet. Rar 18,960.00
260 pieces 10mm & Bet. Rar 30,680.00
30 kilos #16 tie wire 1,350.00
Subtotal 105,890.00

3. Carpentry Works
160 pcs. 2 x 2 x 2’ ceiling 22,400.00
50 pcs. 4 x 4 x ¼’ marine plywood 21,000.00
5 pcs. 2 x 6x 8 ‘ door 1,600.00
 Other materials 13,850.00
Subtotal 58,850.00

4. Hardware & Finishing hardware

Primary hardware material 54,287.97
5 pcs. 1.2m x 2 x 6 Purlim 2,750.00
5 pcs. 3/16 x 2 Angle Bar 2,200.00
36 pcs. 1.2m x 2 x 4 C. Purlim 11,880.00
14 pcs. 3/16 x 1 Angle Bar 3,780.00
5 pcs. 3/16 x 1 Flat Bar 900.00
20 kilos Welding Rod 1,500.00
3 gallons Metal Premier 1,440.00
2 sets Door Lockset 1,400.00
Subtotal 80,137.97

5. Renestration
360 4 x 24 blades 12,600.00
24 pairs @ 15 B Jalousie Frame 4,200.00
Subtotal 16,800.00

6. Forms/ Scaffoldings
100 pcs.2 x 3 x 12 Coco lumber 5,100.00
100pcs. 2 x 2 x 12 Coco lumber 3,400.00
Subtotal 8,500.00

Total Cost of Materials 286,277.97

Labor 114,511.19
Contractors 34,353.36
Design/Supervision 8,588.34
Gross Total P 433,730.86

Rounded off to the Nearest peso 444,000.00

Multiplied by 2

Total P 888,000.00
V. MANAGEMENT
VI. MANPOWER

A. Production

Since the business uses modern technology of producing the chocolates and
there are only 120,000 units are estimated to be sold in its initial stage of operation, the
management may employ only thirteen (13) total number of workers who will carry out
the production requirements. Table I below shows the estimated cost of production
employing the services of 13 workers only. It is shown that production is being
segregated into four (4) major areas. These are the Roasting, Winnowing, Mixture
Processing and Molding and Packaging Areas.

Table I. Estimate of Production Cost: Wages

ESTIMATE OFPRODUCTION COST: WAGES

Department Variable Costs Fixed Costs
wage
(project component wage categories categories
(no. of
(no. of workers) workers)
No
. Description
1 Personnel(s) in Cocoa Bean Roasting Area 2
 2 Machine Operator cocoa bean peeling and grinding 1
3 Personnel(s) in Choco Mixture Processing Area 4
4 Personnel(s) in Chocolate Molding and Packaging 6
Total No. of Workers 13
Working Hours per Day 20
Working Days per Week 5
Hours per Year 5,280
Wages per Year 561,000
Surchage (%)
Wages per Year 561,000
Total 561,000

Table II. Estimateof Production Cost: Salaries

ESTIMATE OFPRODUCTION COST: SALARIES

Department
(project component Salary Categories (No. of Staff)
No
. Description A B C D E Total
1 Supervisor/Quality Control 1 1
2 Accounting Personnel 1
3 Inventory in Charge 1 1
4 Warehouse/Inventory Clerk 1 1
5 Sales Staff 1 1
6 Purchasing Staff 1 1
7 Maintenance Personnel 1 1
8 Driver 1 1
9 Security 3 3
Total No. of Staff 1 2 3 5 10
Working Hours per Day 8 8 8 8 32
Man-months per year 12 12 12 12 48
Salaries per Month 10,000 8,000 6,000 5,000 29,000
Surcharge (%)
Salaries per Year 120,000 192,000 216,000 300,000 828,000
Total 120,000 192,000 216,000 300,000 828,000
VII. FINANCIAL ASPECT

A. Total Investment Cost

5. Working Capital Requirements

The study shows that in order to establish a chocolate manufacturing business here in
Sulat, Eastern Samar, the proponents must have a working capital requirement of P
5,000,000.00. This working capital requirement is composed of P 2,000,000.00 initial
capital investment of the owner and P 3,000,000 fund from a 5- year bank loan with
12% interest per annum.

6. Fixed Asset

As a new line of business of ACONG”S Homebake Products which is a manufacturing

business, it is very necessary that a separate location of land property must be allotted
for the establishment of production site for the making of chocolate candy bars. A
building that would serve as a factory for chocolate processing is also needed. It is
estimated that a 1,000 square meter area lot and an 800 square meter floor area
building would be sufficient for the project. High technology equipments which are
customed-made for production would also be purchased to ensure the quality of
products produced.

7. Investment Costs

Land (1,000 square meter) P 898,000

Building (800 square meter floor area) 888,000
Production Equipment 1,700,000
Office Equipment 43,000
Furnitures and Fixtures 27,000

TOTAL P 3,566,000

FORMULA METHOD

ADDITIONAL FINANCING NEEDED ( AFN ) MAY BE COMPUTED AS FOLLOWS:

Additional Required Spontaneous Increase in

Funds = increase - increase - retained
Needed in assets in liabilities earnings

Where:

Required
Increase = change in x current assets (present)
In assets sales sales (present)

Spontaneous
Increase = change in x current liabilities (present)
In liabilities sales sales (present)

Increase
In retained = earnings - dividend
Earnings after taxes payment
COMPUTATION OF INCOME TAX

If net income is over P250,000 but not over P500,000, TAX will be:
P50,000 + 30% of excess over P250,000

If net income is over P500,000 TAX will be:

P125,000 + 34% of excess over P500,000

4. Financial Projections

A. Projected Income Statement

ACONG'S CHOCOLATE MANUFACTURING

PROJECTED INCOME STATEMENT
For the Year Ended December 31, 2023

Sale P
s 3,300,000.00
Less
: Cost of Goods Sold

Raw Materials Inventory P 440,510.00

Direct Labor 561,000.00

Factory Overhead 129,000.00

Cost of Goods
 Manufactured 1,130,510.00

Ending Inventory 84,300.00

Cost of Goods Sold 1,046,210.00

Gross Profit 2,253,790.00

Less
: Operating Exepenses

Salaries and Wages 828,000.00

SSS Contribution 147,752.88

Electricity and Water 87,610.00

Telecommunications 11,940.00

Supplies Expenses 48,000.00

Advertising 159,000.00

Fuel and Oil 56,000.00

Depreciation Expenses 212,520.00

Interest Expense 360,000.00

Taxes and Licenses 16,280.81

Total Operating Expenses 1,927,103.69

326,686.3
Operating Income 1

Other Income 36,000.00

P 362,686.3
Net Income 1

B. Projected Balance Sheet

ACONG'S CHOCOLATE MANUFACTURING

 PROJECTED BALANCE SHEET
As of December 31, 2024

ASSETS

Current Assets

Cash P 731,100.42

Accounts Receivable 495,000.00

Inventory 84,300.00
Supplies 25,000.00

Total Current Assets P 1,335,400.42

Property Plant and Equipment

Land 898,000.00

Building, net 852,480.00

Production Equipment, net 1,530,000.00
Office Equipment, net 38,700.00
Furnitures and Fixtures 24,300.00
Total Property Plant and Equipment 3,343,480.00

P
TOTAL ASSETS 4,678,880.42

LIABILITIES & CAPITAL

Liabilities

Loans Payable P 2,400,000.00

Capital
E. Sy Capital, Beginning P 2,000,000.00

Add: Net Income 278,880.42

E. Sy Capital, End 2,278,880.42

P
TOTAL LIABILITIES AND CAPITAL 4,678,880.42
 C. Projected Cash Flow Statements

ACONG'S CHOCOLATE MANUFACTURING

PROJECTED STATEMENT OF CASHFLOWS
For the Year Ended December 31, 2025

Cash Flow from Operating Activities

Cash Inflows
Cash Received from Sale of Goods P 2,805,000.00

Cash Received from Other Income 36,000.00 P 2,841,000.00

Cash Outflows:
Payments for taxes 83,805.89
Payments to suppliers 1,534,340.81

Payments to Employees 975,752.88 2,593,899.58

Net Cash from Operating Activities 247,100.42

Cash Flows from Investing Activities

Purchase of Property Plant and Equipment 3,556,000.00
Net Cash Flow from Investing Actitivities (3,556,000.00)

Cash Flows from Financing Activities

Cash Inflow
Acquisition of Loan 3,000,000.00

Cash Outflow

Payment of Interest from Loan 360,000.00

Payment of Loan Principal Amount 600,000.00 2,040,000.00

Net Increase in Cash (1,268,899.58)
Cash at the Beginning of the Year 2,000,000.00

P
Cash at the End of the Year 731,100.42
 5. Production Cost and Expenses

Estimated Costs and Expenses

100,000 units

Raw Materials
Cacao Beans 156 sacks of cacao beans @ P145/sack P 22,620.00
Sugar 960 kilos of sugar @ P40/kilo 37,440.00

Milk 7,500liters @ P49/liter 367,500.00

Nuts 7 sacks @ 1,850 12,950.00

Raw Materials 440,510.00

13 workers with 5,280 labor hours
Direct Labor worked/year 561,000.00

Factory Overhead 129,000.00

Production Cost P 1,130,510.00

Other Estimated Cost

Advertising and Packaging 159,000.00

Factory Cost

Light and Water-Factory 56,946.50

Fuel and Oil 56,000.00 112,946.50

Administrative

Salaries and Wages 828,000.00

SSS Contributions 147,752.88

Light and Water-Office 30,663.50

Telecommunications 11,940.00

Supplies Expenses 48,000.00

Interest Expenses 360,000.00

Taxes and Licenses 16,280.81

Depreciation 212,520.00 1,655,157.19

 Subtotal 1,927,103.69

Total Cost P 3,057,613.69

B. Project Financing

The project is estimated to require a P 5,000,000 capital structure composed

of 2, 000,000 initial capital of MR. EDWARD ACONG, the proprietor and 3,000,000
obtained from a bank loan with 12% interest per annum.

C. Financial Evaluation

1. Pay Off Period

The bank loan of P3,000,000.00 with 12% interest every year payable with uniform
annual payments of P 600,000.00 has a pay off period of 5 years.

2. Simple Rate of Return

Net Income
Rate of Return on Sales =
Net Sales

362,686.31
= 3,300,000.0
0

= 10.99%
3. Break Even Point
 Fixed Cost
Break Even Point in units = Contribution
Margin

77,400.00
=
18

= 4,300.00

To Check:

129
Sales (P30 x 4,300 units) = ,000
Fixed Cos + Variable Cost [77,400 + (12 129
x 4300) = ,000
Break Even 0
VIII. SOCIAL DESIRABILITY ASPECT

The primary objective of this study is to determine the feasibility and viability of
a proposed plan to establish a Chocolate Manufacturing in Sulat, Eastern Samar. Part of
this study is to be able to shed light to the proponent of this project as to risks, cost
expenditures, benefits, marketability and profitability of the product.

After interpreting the data gathered and concluding that the proposed project is
feasible, we made some financial projections that show a favorable outcome to the
proponent. It is been estimated that after a year of operation with the new business
venture, ACONG’s Homebake Products can enjoy a material increase in their income in
the amount of P 382,696.31 in the first year of operations only.

Moreover, this project does not only give a great deal of benefits to the
proposing parties but to the society as well. With the establishment of a new line of
business, which is the chocolate manufacturing, ACONG’s Homebake Products can
contribute to the improvement of the economy locally by somehow increasing the
employed people in the society. In the first year of operations, the new line of business
would already generate a favorable income material to the owner of the project. Usually
companies would only break even in their first year of operations. But the proposed
chocolate manufacturing has already shown its profitability. It is expected that with a
favorable and profitable manufacturing operations, ACONGs’ would increase their
production of chocolates. This implies that more and more personnel and workers are
needed. Thus giving a venue for people to get employed and earn their money. If there
are more people earning, this means that taxes to be returned to government would
also increase. If there is an increase in production, there are more products to sell,
more income is generated. This means that the business is contributing to the local
economy.

Local farmers will be encouraged to cultivate cacao trees which have been
neglected for years. The study estimated that there would be income generated with
their by products and waste. By products generated during production are the shells of
cocoa beans that can be sold as animal feeds. It is projected that there are 500 kilos of
animal feeds created in the process of making chocolates. Those who are racing
animals would have a local access to suppliers of feeds that are very affordable for a
price of P 6.00 per kilo.

Wastes generated during production are mostly organic, so this may not give a
problems to the environment, the community and the health of the residents near the
site of production.

This chocolate manufacturing business will be the first ever manufacturing

business not just in San Vicente but the whole Southern Northern Cadiz.