Hypothetical Calculations and Assumptions for Operating Expenses

Year 2021

Assumptions:

Labor: Assume a fixed monthly salary for a small team of

employees.

1. Number of employees: 2
2. Monthly salary per employee: ₱500
3. Annual Labor Cost: 2 employees × ₱500/month × 12 months
= ₱12,000

Utilities: Estimated based on average monthly utility bills.

1. Monthly utility cost: ₱250

2. Annual Utility Cost: ₱250/month × 12 months = ₱3,000

Insurance: Fixed annual premium.

1. Annual Insurance Cost: ₱2,400

Sales Promotion: Budget allocated for marketing campaigns.

1. Annual Sales Promotion Cost: ₱12,000

Delivery and Transportation: Based on delivery frequency and

cost per delivery.

1. Monthly delivery cost: ₱500

2. Annual Delivery and Transportation Cost: ₱500/month × 12
months = ₱6,000

Miscellaneous: General miscellaneous expenses.

1. Annual Miscellaneous Cost: ₱1,500

Equipment: Investment in equipment for operations.

1. Annual Equipment Cost: ₱30,000

Total Operating Expenses Calculation for 2021:

Total Expenses=₱12,000+₱3,000+₱2,400+₱12,000+₱6,000+₱1,500+
₱30,000=₱66,900\text{Total Expenses} = ₱12,000 + ₱3,000 + ₱2,400 +
₱12,000 + ₱6,000 + ₱1,500 + ₱30,000 =
₱66,900Total Expenses=₱12,000+₱3,000+₱2,400+₱12,000+₱6,000+
₱1,500+₱30,000=₱66,900

Year 2022

Assumptions:

Labor: Increased due to additional hires or raises.

1. Number of employees: 3
2. Monthly salary per employee: ₱500
3. Annual Labor Cost: 3 employees × ₱500/month × 12 months
= ₱18,000

Utilities: Increased due to higher usage or rates.

1. Monthly utility cost: ₱416.67

2. Annual Utility Cost: ₱416.67/month × 12 months = ₱5,000

Insurance: Fixed annual premium.

1. Annual Insurance Cost: ₱2,400

Sales Promotion: Increased budget for expanded marketing.

1. Annual Sales Promotion Cost: ₱18,000

Delivery and Transportation: Increased due to higher sales

volume.

1. Monthly delivery cost: ₱1,000

2. Annual Delivery and Transportation Cost: ₱1,000/month ×
12 months = ₱12,000

Miscellaneous: Remains constant.

1. Annual Miscellaneous Cost: ₱1,500

Equipment: Continual investment in equipment.

1. Annual Equipment Cost: ₱30,000

Total Operating Expenses Calculation for 2022:
Total Expenses=₱18,000+₱5,000+₱2,400+₱18,000+₱12,000+₱1,500+
₱30,000=₱87,900\text{Total Expenses} = ₱18,000 + ₱5,000 + ₱2,400 +
₱18,000 + ₱12,000 + ₱1,500 + ₱30,000 =
₱87,900Total Expenses=₱18,000+₱5,000+₱2,400+₱18,000+₱12,000+
₱1,500+₱30,000=₱87,900

Year 2023

Assumptions:

Salary: Introduced separate salary expense.

1. Annual Salary Cost: ₱20,000

Labor: Increased further due to additional hires or raises.

1. Number of employees: 5
2. Monthly salary per employee: ₱500
3. Annual Labor Cost: 5 employees × ₱500/month × 12 months
= ₱30,000

Utilities: Increased further.

1. Monthly utility cost: ₱541.67

2. Annual Utility Cost: ₱541.67/month × 12 months = ₱6,500

Insurance: Increased premium.

1. Annual Insurance Cost: ₱3,600

Sales Promotion: Further increased for more extensive marketing.

1. Annual Sales Promotion Cost: ₱25,000

Delivery and Transportation: Further increased due to higher

sales volume.

1. Monthly delivery cost: ₱1,375

 2. Annual Delivery and Transportation Cost: ₱1,375/month ×
12 months = ₱16,500

Miscellaneous: Remains constant.

1. Annual Miscellaneous Cost: ₱1,500

Equipment: Continual investment.

1. Annual Equipment Cost: ₱30,000

Total Operating Expenses Calculation for 2023:

Total Expenses=₱20,000+₱30,000+₱6,500+₱3,600+₱25,000+₱16,500+
₱1,500+₱30,000=₱113,100\text{Total Expenses} = ₱20,000 + ₱30,000 +
₱6,500 + ₱3,600 + ₱25,000 + ₱16,500 + ₱1,500 + ₱30,000 =
₱113,100Total Expenses=₱20,000+₱30,000+₱6,500+₱3,600+₱25,000+
₱16,500+₱1,500+₱30,000=₱113,100

Summary

The increase in operating expenses each year reflects the growth of the
business, which involves hiring more staff, expanding marketing efforts,
increased utility usage, and higher delivery and transportation costs.
These calculations and assumptions help to understand the rationale
behind the increasing operating expenses.

Would you like to adjust any specific assumptions or explore any other
details?