MONTAVUERDE

Stone Paver Manufacturing Company

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A Feasibility Study and Accounting System Presented to the Faculty of the Department of Accountancy School of Accountancy and Business Management Saint Louis University

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In Partial fulfillment Of the Requirements of the Course Accounting 403b (Management Consultancy II)

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By:

GUIAWAN, APRIL JOY C. MONSALES, MICHELLE ANN M. NOVIDA, KATHLEEN MARIE V. PERALTA, GIEANNY LOISE C. UNCIANO, KRISTEL MAE V.

March 2012

Acknowledgement

It is with immense gratitude that we acknowledge the support and help of the persons, the group of individuals, and institutions who have made the achievement of this work possible.

Unending praises and gratitude to our loving parents, siblings, relatives, mentors and friends, they have been our inspiration.

We gratefully acknowledge our dear adviser, Dr. Elvira Dacayo, for her advice, supervision, and crucial contribution from the beginning until the end of this study in order to finish this humble work.

To our distinguished panel, Mrs. Lorie Ann Barry and Sir Allan Frank Silva who has rendered much of their time, offered advice and insight throughout our work.

To Hon. Mayor John Rodney Arcinue of Sual, Pangasinan, Ms. Sheryl G. Uson of MENRO, and Engr. Percinate A. Sison, who have generously gave their permission to adopt their process of manufacturing eco-friendly stone pavers and provided us almost all of the information that we need.

To GMA News Anchor Mike Sabado, who helped us in finding the eco-friendly stone paver project of Hon. Arcinue of Sual, Pangasinan.

To the Baguio General Engineering Contractors, First Premiere Finishing Centre, and LCB Rock Stone, who patiently responded to our interviews, inquiry and concerns.

And most especially to God Almighty, our creator and source of strength.

And to all those who in one way or another helped in the completion of this humble work, our most sincere gratitude is extended.

Thank you!

Table of Contents
Project Summary Market Study Logo Name of the Business Name of the Product Properties of the Product Uses of the Product Market Description Demand Supply Demand-Supply Analysis Price Study Marketing Program ...................... .. ... .. .. i-iii 1-7 1 1-2 2 2 2-3 3 3-5 5 5-6 6-7 7 8-20 8 9 10-11 11-13 13 14-15 16 16-18 18 19-20 20

Technical Study .. Introduction Manufacturing Flowchart Manufacturing Process ........ Machinery and Equipment .. Plant Location .. Plant Layout .. Plant Size and Production Schedule .... Raw Materials and Supplies .. Labor Requirements .. Utilities Required .. Waste Disposal Method .. Management Study Basic Consideration Form of Ownership Organizational Chart Officers and Key Personnel Legal Requirements Project Schedule Financial Study Major Assumptions Total Project Cost Sources of Financing Pro-forma Financial Statements and respective schedules Financial Analysis

.... 21-27 .. 21 .. 21-22 .. 22 . 22-25 . 26 ... 27 ... . . . . . 28-56 28-30 30-32 32 33-52 53-56 57-58 57 57-58 58

Socio-economic Study ... Employment and Income Generation . Environmental Impact . Taxes ..

Accounting System Chart of Accounts Cycles and Flowcharts Internal Controls Business Documents

.... . .... ......

59-85 59-68 69-73 74-76 77-85

Appendices . 86-91 List of Baguio Contractors .. 86-87 Computation of Demand of Baguio Contractors ... 87-88 Computation of Quarterly Demand of Baguio / Dealers of Stone Pavers .... 88-89 Articles of Partnership .... 89-91 Curriculum Vitae . 92-93 Government forms . 94-113

PROJECT SUMMARY

i PROJECT SUMMARY I. Name of the enterprise MONTAVUERDE is the chosen name of the business. The name of the business is derived from the prominent Family Names of the partners, namely: Monsales, Peralta, Novida, Unciano, and Guiawan. Mon(Monsales), Ta(Peralta), Vuer(Novida, Unciano, Guiawan), De(meaning, this is). We believe that the name best represent us and the Big name we hoped the company would be. The partners have formulated several names until they have arrived to the said name. They chose MONTAVUERDE for its enticing and catchy sound that would have a major part with the marketability of the enterprise.

II. Location Location of business is really an essential part in putting up a business. The plant will be situated in 1,200 square meters vacant lot located at Naguilian Road, Baguio City. The place also offers distance to the residential areas that might be disturbed by the sound of operations. The plant is approximately 2 kilometers or 5 minutes drive from Irisan dumpsite where plastic waste will be sourced.

III. Project Long-range Objectives The objectives of MONTAVUERDE after 10 years are: a) To be able to establish a good name in the industry and remain competitive b) To be able to increase two or three times the net income c) To be able to expand the business. This expansion shall increase work force, upgrade equipments and facilities while maintaining quality with our services. d) To be able to increase its market share e) To be able to promote community development while reducing the need for new landfills, preventing pollution, saving energy, and reducing greenhouse gas emissions.

IV. Feasibility Criteria To obtain favorable results from the operations is the main criterion of this project. Right product, location, price, target market and management are the keys to the success of this business. Social responsibility is also considered for the business to be feasible since target market will support business who promotes eco-friendly products by decreasing the harmful effects of plastics to the society.

ii V. Highlights of the Project 1. History Stone pavers are starting to be recognized as unique and elegant flooring materials in the Philippines. Contractors are choosing stone pavers to be used for their projects because it is easier to install and more durable than other flooring materials. The researchers come up with the idea that this product will be tested for feasibility since there are still few manufacturers of stone pavers in the Philippines.

2. Project Timetable MONTAVUERDE will commence its operation by the start of January in the year 2013. The feasibility study of the project is in progress.

3. Mode of Financing Each partner will invest an amount of P 2,500,000.00 for initial contribution. This P 2,500,000 comes from the partners inheritance, personal loan, individual income, and savings. The personal loan will be at the risk of the partner and not of the partnership.

VI. Major Assumptions and Summary of Findings

1. Market Feasibility This area identifies the market, demand, and supply and other factors that affect the market. Based on our findings, an existing unsatisfied demand is uncovered, thus leading to the feasibility of the business. MONTAVUERDE offers a new, innovative, environment friendly, and financial friendly product named as PAVERTRAX. Pavertrax is basically used for flooring system. Concrete paving blocks can be used for walkways, patios, pool decks and driveways.

2. Technical Feasibility Materials, equipment, personnel and utilities needed in the production process for stone pavers are vital in this study. The production processes have the following stages: making of mixture 1 (for the top layer), making of mixture 2 (for the base), and the making of the stone pavers using the auto paver making machine. MONTAVUERDE also ensures that it purchases quality standard machinery and equipment.

iii The Pavertrax plant will be situated in 1,200 square meters vacant lot located at Naguilian Road, Baguio City. The place also offers distance to the residential areas that might be disturbed by the sound of operations. The plant is approximately 2 kilometers or 5 minutes drive from Irisan dumpsite where plastic waste will be sourced.

3. Management Feasibility MONTAVUERDE will be managed by the three capitalist-industrial partners together with the newly hired employees. Two partners will only be capitalist partners. MONTAVUERDE strictly complies with Labor Requirements. The higher officials monitor and evaluate the personnel performance to ensure their efficiency and effectiveness as human capital. MONTAVUERDE also gives emphasis on its legal and social and environmental responsibilities by securing licenses, paying taxes, paying premium dues of the employees to SSS/PAG-IBIG/PhilHealth, complying with the Labor Code, securing the employees and the community from possible hazards cause by the operation and disposing residues properly and ensuring sanitation in the workplace.

4. Financial Feasibility MONTAVUERDE Company has projected its financial statements for the next five years. MONTAVUERDE secures its resources and assets both physical and intangible by employing quality, economy, and efficient and effective internal control system. MONTAVUERDE has also projected its income for five years will be P 492,561.64, P 551,160.23, P 1,175,400.23, P 2,157,539.70, and P 3,124,999.57. MONTAVUERDEs initial operating capital of P 12,500,000 will be contributed equally by the partners.

5. Socio-Economic Feasibility This area discusses the social responsibility of MONTAVUERDE. MONTAVUERDE on its operation will consider the local people through hiring of workers. We will be providing job opportunities to many individuals and would eventually minimize problems of unemployment and poverty. With its main product, Pavertrax it will reduce Baguio Citys biggest problem, which is the garbage since we are using recycled plastics. Recycling plastic helps the environment by reducing the amount of space used in a landfill for plastic products. MONTAVUERDE will also practice its corporate good governance by ensuring legal papers and licenses for its operation as well as paying the taxes due to the government.

MARKET STUDY

MARKET STUDY

The market study is an important part of every feasibility study because it is centered in the determination of demand for a certain product or service. It is mandatory to have knowledge on what the target market needs and/or wants to be satisfied. Every business is motivated by profit. To be able to achieve this goal, perceived market should be satisfied by the services or products offered by a firm. Without determining the demand, there could be no market. Without market, feasibility study is absolutely not possible.

Logo

The logo depicts what the business is all about. The letter M stands for MONTAVUERDE, the name of the partnership. The cycle represents the 3R concepts in recycling. Recycling Plastics are our main concern by promoting eco-friendly products like Pavertrax and helping to save the environment. Then the color, partners chose white showing MONTAVUERDEs pure and clean intentions of creating a cleaner and greener Baguio. The letter M is made up of rigid lines that are interconnected. Rigid, solid and resist deformation same goes with our product. MONTVUERDE offers a product in its best state and quality. Also, the spaces in between the lines shows flexibility, openness to new ideas, which would make us serve our customers better and would make them more satisfied.

Name of the Business MONTAVUERDE is the chosen name of the business. The partners have formulated several names until they have arrived to the said name. The name of the business is derived from the cluster of prominent Family Names of the partners, namely: Monsales, Peralta, Novida, Unciano, and Guiawan. Mon (Monsales), Ta (Peralta), Vuer (Novida, Unciano, Guiawan), De (meaning, this is). The partners believe that the name best represent them and the Big name they hoped the company would be. They chose MONTAVUERDE for its enticing and catchy sound that would have a major part with the marketability of the enterprise. MONTAVUERDE envisions itself to become an Innovative Global Leader, upholding quality at every stage and maintain consistency. By its deeds, shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits and in doing so MONTAVUERDE will become restorative through the power of influence.

MONTAVUERDE will become the first name in commercial and institutional interiors worldwide through its commitment to people, process, product, place and profits. It will strive to create an organization wherein all people are accorded unconditional respect and dignity; one that allows each person to continuously learn and develop. MONTAVUERDE will focus on product (which includes service) through constant emphasis on process quality and engineering, which will combine with careful attention to our customers needs so as always to deliver superior value to our customers, thereby maximizing all partners satisfaction. Partners will honor the places where business will be done by endeavoring to become the first name in industrial ecology, an enterprise that cherishes nature and restores the environment. Interface will lead by example and validate by results, including profits, leaving the world a better place than when partners began, and they will be restorative through the power of our influence in the world.

Name of the Product MONTAVUERDE offers a new, innovative, environment friendly, and financial friendly product named as PAVERTRAX. The product is named as such because it directly describes its purpose, Paver means flooring. It is used to create a hard surface for an outdoor living space such as a terrace or patio. The partners believe that the name has a unique retaining power that would lure customers to try the product.

Properties of the Product Pavertrax is mainly made of plastic waste supplemented with water, sand, and cement. Plastics are composed of fillers, pigments, and other additives like polymer and polyvinyl chloride. The cement will bind the plastics for it to be concrete. It will hold the plastics together, firmer and better. The manufacturing of this product was adopted from the paver-making project of Mayor John Rodney V. Arcinue of Sual, Pangasinan. The partners were given consent to adopt the said idea for this business. This product will help in minimizing one of the biggest issue in Baguio City which is garbage. The raw materials are acquired through junk shops and the well-known dumpsite of Baguio, Irisan Dumpsite. Pavertrax is a different kind of flooring system, mainly because it is made of plastic waste. It has a lower cost than of the other stone pavers considering that it uses recycled plastics.

Uses of the Product Pavertrax is basically used for flooring system. Concrete paving blocks can be used for walkways, patios, pool decks and driveways. If you are looking for sustainable flooring material, Pavertrax is a sure home run. It has endless and commercial applications of the product. Pavertrax transform landscapes into beautiful dreamscapes.

Market Description 1. Users of the Product The major users of Pavertrax are the professionals engaged in building constructions, such as general engineering contractors who mainly use the product for their respective projects. Pavertrax could also be used by the micro market, namely the households, because of its functionality and easy installation. They could definitely purchase and use it for their own homes.

2.

Geographical dispersion After the companys business operations has proven to be profitable and companys reputation

has been established, it will penetrate the market nationwide and eventually, internationally. The partners decided to buy a 1,200 square meters vacant lot where the plant will be situated at Naguilian Road, Baguio City. The space, as examined, is wide enough and safe to conduct companys manufacturing operations and activities.

Demand-Supply Analysis Demand The MONTAVUERDEs target markets are the contractors engaged in General engineering and the prospective dealers in Baguio City. The list of the contractors has been provided by Department of Trade and Industry Baguio City and will be seen at the Appendix section. The dealers were only discovered by the researchers because DTI and Baguio City Hall do not have the exact list of dealers of stone pavers in Baguio City.

The demand for stone pavers cannot be traced from the agency that may provide data for such product. The researchers did an interview to the contractors to ask how many stone pavers were bought for their projects in the past 3 years (2009-2011). Some contractors do not respond to our interview because their projects are not into flooring system but into construction of building only. Some are not interested to use stone pavers since the product is not that well-known.

On the following table are the contractors who bought stone pavers and number of stone pavers bought for their projects for the past 3 years (2009-2011):

Year 2009

2010

2011

Contractors Name Bondsbuilt Enterprises Melecio Contruction E.M. Muncal Construction Mountain Horizon Segal construction Diate Construction and Allied Services A.I.P. Construction Segal Construction

Table 1 List of Contractors Number of stone pavers bought for a certain project 299,500 94,700 204,000

193,400
217,500 72,600 392,500 197,500

For the dealers, the researchers did an interview to ask how many stone pavers were bought daily/monthly/yearly. The dealers (LCB Rock stone and First Premiere Finishing Centre) gave information how many stone pavers bought monthly from the manufacturers in Manila. Below are the dealers who responded to our interview and the number of stone pavers bought per quarter for the year 2011: Table 2 List of sold Stone pavers by Dealers

QUARTER 1st 2nd 3rd 4th

Table 3 PROJECTED VALUES OF CONTRACTORS Standard Deviation= 9,710.93 YEAR A b (X) Yc 2012 45433.33 5,900.00 4 589,033 2013 45433.33 5,900.00 5 594,933 2014 45433.33 5,900.00 6 600,833 2015 45433.33 5,900.00 7 606,733 2016 45433.33 5,900.00 8 612,633

Number of stone pavers sold by dealers

150,325 168,395 166,522 159,947

Table 4 PROJECTED VALUES OF DEALERS Standard Deviation= 2,068.30 YEARS AMOUNT 2012 688,378 2013 731,567 2014 774,755 2015 817,944 2016 861,133

Table 5 PROJECTED VALUES YEARS 2012 2013 2014 2015 2016 TOTAL DEMAND 1,277,411 1,326,500 1,375,589 1,424,678 1,473,766

The Statistical Straight Line method was used by the researchers to compute the projected demand of contractors and dealers because it yields the smallest standard deviation thus; it will give the most reliable forecast of demand. (Please see Appendix for the Computation) Supply Based on information provided by the Department of Trade and Industry (DTI) and Securities and Exchange Commission (SEC), there were no sole proprietorships/partnership/corporations intended for the production of stone pavers registered in Baguio City. This implies that there are no big competitors, who currently supply the demand of contractors engaged in General engineering and current dealers in Baguio City. All the contractors and dealers that the researchers had interviewed purchase their stone pavers in Metro Manila. Most of the suppliers who manufacture this product are from Metro Manila. MONTAVUERDE will be the first manufacturing company who will produce special stone pavers in Baguio City and be able to supply the increasing demand of stone pavers in the City. For that reason, the researchers just assumed that the present supply for the product is zero (0).

Demand Supply Analysis The demand and supply analysis determines the amount of unsatisfied demand and the share of the market of MONTAVUERDE. The following table shows the target market share for Pavertrax for the targeted dealers and contractors of Baguio City. Table 6: Demand Supply Analysis Year 2012 2013 2014 2015 2016 Projected Demand a 1,277,411 1,326,500 1,375,589 1,424,678 1,473,766 Normal Capacity (3,600*300 Days) 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 Unsatisfied Demand (a-b) 197,411 246,500 295,589 344,678 373,766

The results show that there is an increasing trend for projected Demand. However, there is no projected supply because there is no manufacturing company currently operating in Baguio City. This shows that a manufacturing company of stone pavers here in Baguio City is needed to supply the increasing demand of stone pavers. Our company can capture 100% of the target market in Baguio City but because of limited capacity of equipment, the company can only satisfy the 1,080,000 demand of stone pavers out of the projected demand for the next 5 years. The unsatisfied demand means the demand that cannot be supplied by the company (MONTAVUERDE) in Baguio City. This unsatisfied demand can be supplied by the manufacturers outside the vicinity of Baguio City.

The researchers are positive about the marketability of the product for the reason that our company will be the first one to offer environment friendly stone pavers in Baguio City. Since our product is not well-known to the public as a flooring system, it offers more benefits than the normal flooring materials like asphalt, tiles, and concrete stone pavers. One benefit is that a patio or sidewalk made with Pavertrax allows water to permeate into the ground. This effect slows water and helps prevent runoff. Also, Pavertrax will not split, break, or deteriorate, making them virtually indestructible. According to Engr. Percinate A. Sison of Sual, Pangasinan, the product is tested for compressive strength at UP Diliman and the compression test concludes that the product is stronger and more durable than the usual concrete stone pavers. The results of the compression test will be seen at the Appendix section. The projected demand-supply will be the basis for coming up with the normal capacity to be produced by the business. Nonetheless, the proponents of the study are still optimistic of the feasibility of the business and that MONTAVUERDE will be more profitable and worthwhile enterprise through the years. Furthermore, the proponents of the study anticipate for uncertainties that might alter this projection and that assumptions made in this study may not conform to fluctuating events in the business world.

Price Study Price is determined by what a buyer is willing to pay, a seller is willing to accept, and the competition is allowing to be charged. With product, promotion, and place of marketing mix, it is one of the business variables over which organizations can exercise some degree of control. Factors such as pricing objectives, customers willingness and capacity to pay, competition, costs of manufacturing and selling the product, market demand, economic trend and the perceived value of the product determine the price. It should meet business goals and objectives in profit and wealth maximization and social responsibility by creating a competitive edge of the product being priced, providing customer maximum satisfaction through high quality and eco-friendly product, and enabling competitive positioning of the product. The initial price of the product is at P 7.00 per piece. The price is reasonable since the raw materials are cheaper and price is one of the edges of our product. It is also cheaper compared to other stone pavers which costs P9.00-10.00. This price is based on initial cost (P4.50) of the product plus 55% mark up of cost. The mark up is reasonable compare to 100-200% mark up to other stone pavers manufacturers. The quality of the product will not be affected in using recycled raw materials because as part of the factors in determination of price, perceived value of the product is being considered and proper research, development and innovations will be taken into account and experts will be hired for such. Every year, there will be an increase in the price but with minimal amount only.

Marketing Program MONTAVUERDE aims to provide maximum satisfaction through eco-friendly and quality products to customer. MONTAVUERDE will primarily produce stone pavers that are mainly made up of plastic waste. The product will be affordable and sold at a customer-friendly price. The partners will maintain 20% inventories in the warehouse/stockroom in order to meet the needs of the walk-in customers. The product will be sold on both credit and cash. The company will give discounts to encourage early payment of credit. In terms of shipment, it will be FOB shipping point. There will be no slack and peak season of the product since our product is not seasonal since need for our product depends on the projects of the contractors and monthly purchase of dealers.

Promotions and advertisement will be use to market the product. MONTAVUERDE will use print ads such as catalogs. The partners will also use the internet through social networks (Youtube & Blogspot) and shopping websites (Sulit.com.ph and Mybaguio.biz). And also they come up with our own website to advertise. The promotional activities for the first year- catalogs and website- will be at an estimated cost of P 35,000.00.

TECHNICAL STUDY

TECHNICAL STUDY

I. Introduction The use of pavers, often referred to as paving stones, is growing rapidly on both commercial and residential construction projects. It can be installed on driveways, patios, pool decks, walkways, streetscapes, & roadways. Cracking, which is common with traditional asphalt and concrete pavements, is not an issue with these interlocking pavers due to the joints between the pavers. Interlocking stone pavers are a flexible system and allow for movement.

Pavers' combination of strength, resilient abrasion resistance, and flexibility deliver highly durable, crack-proof pavement able to handle all types of wheeled traffic and pedestrians with very low maintenance requirements. Pavers can be used in all climates and can be walked on immediately upon completion.

Pavers are easy to maintain. Regular sweeping and occasional rinsing are usually the most maintenance needed. Well-manufactured pavers are guaranteed not to crack or delaminate, especially pavers with complete color saturation.

MONTAVUERDE introduces its product PAVERTRAX, stone paver made from plastics. Pavertrax are non-slip and guaranteed to endure even the harshest conditions from shifting soil to extreme hot and cold temperatures without cracking or crumbling. These are sand jointed to allow flexibility, which eliminates the possibility of joints cracking. The plastic material makes it stronger compared to usual stone pavers.

Using plastics to manufacture new floor pavers helps the environment to recycle products that would have been disposed of in landfill sites. Considering the multi millions of plastics disposed of every year in all countries, the researchers found out that this product will help to reduce plastic disposal and eliminate landfill space like Irisan dumpsite located in Baguio City.

The process of making stone pavers is not difficult since it is employed with modern technologies. Using the auto paver making machine, the projected demand seen in the market study will be satisfied by producing its normal capacity of 3,600 stone pavers. The process of making stone pavers will be shown on the next page for further understanding.

Manufacturing Flowchart Mixture 2

Preparation of 8 kilos of plastic materials (any kinds of plastics), one bag of hydraulic cement, 4 cubic feet of fine sand, and 80 Liters of water (10 minutes)

Spraying of plastics using Plantex Odor Eliminator (3 minutes) For the top layer of the pavers, prepare one-half bag of hydraulic cement, one cubic yard of fine sand and 100 Liters of water (10 minutes)

Mixing the hydraulic cement, fine sand, and water using hydraulic concrete mixer (10 minutes)

Pour the mixture 1 and install it as the top layer into the auto paver making machine (2 minutes)

S I M U L T A N E O U S L Y

Pulverizing the plastics using Plastic Shredder (10 minutes per 8 kilos of plastics)

Mix the pulverized plastics with hydraulic cement and concrete sand using hydraulic concrete mixer (8 minutes per production)

Put 80 Liters of water into the mixture 2 (2 minutes)

Pour the mixture 2 and install it as the base into the auto paver making machine (2 minutes)

Making of stone pavers through the auto paver making machine (25 minutes)

Finished Product

Legend: One (1) Hour = 450 stone pavers per batch 3600 stone pavers = 8 batches 8 Hours = 8 batches

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II. Manufacturing Process Pavertrax Raw Materials to be used: Plastics (any kind of plastics) Hydraulic Cement Fine Sand Water Making of Mixture 1 (for top layer of the Pavertrax): 1. Preparation (10 minutes) Prepare the materials needed for the mixture 1 such as: one-half bag of cement, one cubic foot of fine sand, and 100 Liters of water (a production of 450 pavertrax) 2. Mixing (10 minutes) Mix the cement and water into the hydraulic concrete mixer. 3. Pour the mixture 1 into the auto paver making machine and install it as the top layer of the paver (2 minutes) Making of mixture 2 (for the base of pavertrax): 1. Preparation (10 minutes) Prepare the materials needed for the mixture 2 such as: 8 kilos of plastics, one bag of hydraulic cement, 80 Liters of water and 4 cubic feet of fine sand (a production of 70 pavertrax). 2. Odor Elimination (3 minutes) As the plastics are placed into the conveyor, it is sprayed with the Plantex All-in-one solution Odor Eliminator to remove the unpleasant smell of the plastics. 3. Pulverizing (10 minutes) Put the 8 kilos of plastics into the plastic shredder until it becomes pulverize. This pulverized plastic will be transfer into the hydraulic concrete mixer through a conveyor. 4. Mixing (8 minutes) Once the pulverized plastic is transferred into the mixer, mix it with hydraulic cement and concrete sand. Put 80 liters of water into the mixture 2 (2 minutes) Once the mixture is finished, it is transferred to the auto paver making machine. 5. Pour the mixture 2 into the auto paver making machine and install it as the base of the paver (2 minutes) Making of Pavertrax: Once the top layer (mixture 1) and the base (mixture 2) are already installed on the auto paver making machine, the machine will start making the pavers. The mixture for the top layer and base are poured to

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the molder respectively. The machine will mold the mixture for 23 minutes and 2 minutes for drying purposes.

III. Machinery and Equipment MACHINERIES

Hydraulic Concrete Mixer Description: It is a device that homogeneously combines cement, aggregate such as sand and pulverized plastics, and water to form concrete. Cost: P 90,000 Quantity: 2 Supplier: Henan Dasion Mechanical Installation Co., Ltd. Capacity: 560 Liters charging volume

Plastic Shredder Description: It can shred/grind sando bags, PET bottles, plastic containers foil packs, etc. Cost: P350,000 Quantity: 1 Supplier: Jiangsu Lianguan Science & Technology Development Co., Ltd., China Capacity: 350 of plastics/8 hours

Auto Paver Making Machine BW-119 Description: Use to make pavers Cost: P400,000 Quantity: 1 Supplier: Jiangsu Lianguan Science & Technology Development Co., Ltd., China Normal Capacity: 3600 blocks/8 hours

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Hinged Steel Belt Conveyor Description: Conveyors are durable and reliable components used in automated distribution and warehousing Price: P200,000/set Quantity: 2 sets Supplier: Titan Industries, Inc.

FACTORY EQUIPMENT Industrial Weighing Scale Description: Use to make accurate measurement for the weight of plastics and cement Cost: P4,000 Quantity: 1 Supplier: Artech Scientific Trading Co. Chapin 4gal Commercial Backpack Sprayer Description: Use to eliminate the odor of plastics by spraying the Plantex Odor Eliminator Cost: P1,500 Supplier: Ace Hardware Quantity: 1

OTHER FACTORY EQUIPMENT FACTORY EQUIPMENT Fire Extinguisher Exhaust Fan Floor polisher Wheel barrow Push Carts Water Hose Factory suit DELIVERY EQUIPMENT UNIT COST P 999.75 P 1,179.75 P 23,649.75 P 1,850 P 1,350 P 1,159.75 P 589.75 QUANTITY 2 4 1 2 1 2 4 PRICE P 1,999.50 P 4,719 P 23,649.75 P 3,700 P 1,350 P 2,319.50 P 2,359

Isuzu Delivery Truck Description: Use to deliver pavers to respective clients and purchased materials to the plant Cost: P250,000 Supplier: JK Motor supplies, Inc. Quantity: 2

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OFFICE EQUIPMENT OFFICE EQUIPMENT Computer Telephone w/ fax Wall clock Calculator (14D Calcu 2way) Printer Trash can Magazine Box open White Board (36x24) Cork Board (2X3WW) Scissors Stapler Puncher OFFICE FURNITURE AND FIXTURES FURNITURE & FIXTURES Office table Swivel chairs Filing cabinets Cash Box FACTORY FURNITURE AND FIXTURES FURNITURE & FIXTURES Monoblock chairs Table UNIT COST P 300 P 2,000 QUANTITY 4 1 PRICE P 1,200 P 2,000 UNIT COST P 2,000 P 550 P 3,000 P 1,599.75 QUANTITY 4 4 2 1 PRICE P 8,000 P 2,200 P 6,000 P 1,599.75 UNIT COST P 18,000 P 4,480 P 209 P 680 P 2,300 P 1374.75 P 138.50 P 820.00 P 465.00 P 50.25 P 196.50 P 235 QUANTITY 2 1 1 3 1 1 3 1 1 2 2 1 PRICE P 36,000 P 4,480 P 209 P 2,040 P 2,300 2749.75 P 415.50 P 820.00 P 465.00 P 100.50 P 393 P 235

V. Plant Location Location of business is really an essential part in putting up a business. The Pavertrax plant will be situated in 1,200 square meters vacant lot located at Naguilian Road, Baguio City. The place also offers distance to the residential areas that might be disturbed by the sound of operations. The plant is approximately 2 kilometers or 5 minutes drive from Irisan dumpsite where plastic waste will be sourced.

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Plant Layout

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VI. Plant Size and Production Schedule The plant size will be composed of two buildings. Area of Building A will be 290 square meters while the area of Building B will be 700 square meters. The manufacturing plant is located at Naguilian Road, Baguio City.

Considering the sizes of all machines and equipment to be installed as well as the sufficiency of space needed to facilitate material handling and for laborers to carry out their assigned task conveniently and effectively, the factory space would be sufficient to accommodate all facilities and workers. MONTAVUERDE will operate at normal capacity. No production during breakdowns, non-working holidays, extra ordinary circumstances like strikes and calamities that will hinder factory workers and other employees from going to the plant. The regular operating year is equivalent to 300 days computed as follows:

Total number of days in a year Less: Total number of sundays in a year Regular Holidays Special Holidays Total regular working days in a year 52 10 3

365

65 300

The annual production of stone pavers will be computed as follows: Production of stone pavers per cycle Multiply by: 8 Production cycles per day Production of stone pavers per day Multiply by: Total working days in a year Annual production of stone pavers VI. Raw Materials and Supplies RAW MATERIALS Plastic Bags Description: It is a type of packaging made of thin, flexible, plastic film, nonwoven fabric, or plastic textile. Plastic bags are used for containing and transporting goods. Price: P17.00 per sack Supplier: Junk shops near Irisan Dumpsites 450 8 3,600 300 1,080,000

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Plastic Bottles Description: It is a bottle constructed of plastic, with a neck that is narrower than its real body and an opening at the top. The mouth of the bottle is normally sealed with a plastic bottle cap. Plastic bottles are typically used to store liquids such as water, soft drinks, motor oil, cooking oil, medicine, shampoo, milk, and ink. Price: P20.00 per kilo Supplier: Junk shops near Irisan Dumpsite

Cement Description: It is a binder, a substance that sets and hardens independently, and can bind other materials together. Cement used in construction is characterized as hydraulic or non-hydraulic. Hydraulic cements, which will be used in this study, harden because of hydration, chemical reactions that occur independently of the mixture's water content. Price: P120 per bag Supplier: Holcim Philippines Inc., Baguio

Fine sand Description: Fine sand consists of natural sand or crushed stone sand. It is hard, durable, clean and be free from organic matter etc. Price: P2,300.00 per load Supplier: APCO Hardware and Construction Supply, Baguio

FACTORY SUPPLIES Plantex All-in-One Solution Odor Eliminator Description: A unique and organic liquid concentrate that eliminates offensive odors at the very sourcea solution for all types of odor. Price: P640.00 Supplier: George Mapile, Jr.

OTHER FACTORY SUPPLIES Factory Supplies Creston Dust Masks Creston Gloves UNIT COST P 19.75 P 54.75 QUANTITY 4 4 TOTAL COST P 79 P 219

18

OFFICE SUPPLIES (for the first 3 months) Office Supplies Vouchers Official Receipts Delivery Receipt Receiving Report Long and short coupon bond White board Marker Ballpens (set-3) PRICE P 51.25 P 47.75 P 40.00 P 64.75 P 360 P 42.50 P 10.50 QUANTITY 3 1 1 1 2 1 3 TOTAL COST P 153.75 P 47.75 P 40.00 P 64.75 P 360.00 P 42.50 P 31.50

VII. Labor requirements

MONTAVUERDE will need 4 employees directly involved in the production process of Pavertrax. The four (4) production workers is divided based on their nature of work: one operator of auto paver making machine, one operator of hydraulic concrete mixer for mixture 1 and preparer of raw materials of mixture 1, one operator of hydraulic concrete mixer and preparer of raw materials of mixture 2, and one person for stock room (storage of stone pavers). Two security guards will be outsourced from Warriors Security Detective and Investigative Services Inc. The security expense will be seen on the financial part of the study.

All employees will start their work at 8:00 am in the morning until 5:00 in the afternoon including the 1 hour break from 12:00 to 1:00 since production per cycle consists of 1 hour. Eight (8) production cycles will be done per day by the workers. List of all the employees that will be hired is shown below together with their corresponding daily rates:

Position Inventory Clerk Cashier Utility Man Delivery Man Production Workers

# of employees 1 1 2 2 4

Daily Rate 280 280 250 280 250

19

IX. Utilities required 1. Electric power The electricity will be supplied by the BENECO (Benguet Electric Cooperative, Inc.). Energy rates apply as follows:

Estimated Electric Consumption per month (751.5 kwh x P9.969 rate/kwh) Multiply by: 12 mos.

P 7,491.70 12

Electric Consumption for 1st year

P89,900

2.

Water supply The water supply of the company will be supplied by Baguio Water District (BAWADI). The water supply from BAWADI will be continuous for 24 hours. There would be a water tank located at the back of the plant for emergency purposes like water shortages especially abrupt and unannounced water shortages. During water shortages, the water will be ordered from a water delivery.

Monthly Water Consumption (75 cubic meter*57/cu.m) Multiply by: number of months in a year Water Consumption for 1 year
st

P 4,275.00 _____ 12 P51,300.00

3.

Telecommunications Communication services will be provided by Philippine Long Distance Telephone (PLDT), the countrys biggest telephone service provider company.

Monthly Communication Expense Multiply by: Number of months in a year Communication Expense per year Add: Installation fee Telecommunication cost for 1st year

P 2,000.00 12 P 24,000.00 3,500 P 27,500.00

20

4.

Fuel Fuel services will be provided by Petron Corporation, the largest oil refining and marketing company in the Philippines.

Monthly Fuel Expense ( P 58 x 5.4598 liters x 25 days) Multiply by: Number of months in a year Communication Expense per year

P 7,916.7 12 P95,000.00

X. Waste Disposal Method For this manufacturing company, there will be no waste disposal method for plastics since all plastics will be used for the production. There will be no waste since the company aims to recycle all kinds of plastics with the use of cement and sand to produce our product, PAVERTRAX. For the sounds of the machine, the plant will be located far from the residential area so the sounds will not disturbed people situated near the area. For the companys water waste, all drainage is connected to the main drainage tank and it may be used for watering plants.

MANAGEMENT STUDY

21

MANAGEMENT STUDY I. Basic Consideration

Every business is formed in order to achieve certain goals. These goals are geared towards the betterment of the market. Success in the business is achieved through the exerted effort of the management. It gives rise to different strategies being performed and effectively put into action. The situation of the business reflects the effectiveness and the ability of the managers. The ability to survive and grow starts with the managers ability to envision how a business can satisfy market needs and continuous with the managements ability to lead and direct its employees towards the mission.

The partners envision MONTAVUERDE to be the leading manufacturer of stone pavers in Baguio City. Its mission is to provide high quality and eco-friendly stone pavers that are cost competitive to satisfy customers needs.

Our purpose is not only centered on gaining profits, but more importantly, MONTAVUERDE intend to help our country by providing employment, by helping save our environment and by serving the customer to their satisfaction. MONTAVUERDE exists to create employment and provide the employees the best benefits and security in the performance of their work. The partners believe that this could at least alleviate our present economic condition particularly with our low employment rate. MONTAVUERDE is also geared to protect the environment by having eco-friendly stone pavers and thereby complying environmental policies of manufacturing industries. Lastly, MONTAVUERDE assures that the products are safe and manufactured according to the standards and qualification to satisfy customers wants and needs. In these manners, the partners are fulfilling our society as well as our environmental responsibility to our community.

II.

Form of Ownership

MONTAVUERDE will operate under a general partnership. MONTAVUERDE have chosen this form of partnership because partnerships are relatively easy to establish, unlike corporations, by a voluntary agreement between two or more people and it does not entail costs such as incorporation fees, legal fees connected with the preparation of the application for incorporation, expenses incurred by the founders and numerous other expenses. The ability to raise funds may be increased because two or more partners may be able to contribute more funds and their borrowing capacity may be greater is also an advantage. A partnership is subject to less government regulations. Also, partnership may benefit from the combination of varied talents and complementary skills of two or more people that could be combined and used in managing the business, can be cost-effective as each partner specializes in certain aspects of their business, and allow for more creative brainstorming. Finally, a partnership can maintain the blend of

22

a personal and professional working environment since the organization is not as simple as a sole proprietor and not as complex as a corporation. III. Organizational Chart Managing Partner

Financial Partner

Production Partner

Cashier

Utility Man

Delivery Man

Inventory Clerk

Production Worker IV. Officers and Key Personnel 1. PARTNERS Partners are responsible for the overall operation of the business. They are the ones responsible in setting the goals and objectives of the partnership, formulate strategic plans and policies upon the commencement of the business activities and for decision making functions in all areas of the business. All of the partners have their own task. Partners shall: Formulate rules and regulations for the general operation and management of the firm Carry the burden of business liabilities Purchase, receive, take and otherwise acquire in the name of the business properties, rights, or privileges Establish incentives or compensation plans for the employees including top management Conduct regular or special meeting Create, implement, and amend the law of the business Authorize the issuance of bank checks.

23

Monitor all employees. Have authority to hire and dismiss employees. Substitutes employees that are absent. Evaluate the performance of employees.

Capitalist- Industrial Partner (General Manager) - Gieanny Loise C. Peralta The managing partner is in charge for the overall direction and control of the companys entire operation. She supervises and controls the overall performance of the business and responsible for planning, organizing, leading and coordinating the strategic planning functions and the sections of the business. She also takes care of the overall orderliness, wellness and security of the company. She is primarily responsible in monitoring the sufficiency and competence of all employees. She is tasked to regularly update the general standards, controls, procedures, policies and by-laws set by the business. She directs the utility man and security guard. She is also responsible in documentation of pertinent papers of the partnership and in monitoring companys compliance in all laws set by the government and regulatory agencies regarding labor matters. She is also responsible for marketing and sales decision and for developing and implementing strategies and programs of sales and marketing. She manages all the sales transactions of the business and examines the contracts with the advertising agencies. She also selects the advertising medium and distributing channels. She will also work hand in hand with the production partner and inventory clerk for the availability of the finished goods ready for sale.

Capitalist- Industrial Partner (Production Manager) - April Joy C. Guiawan The production partner is tasked to establish the overall system in the production of the companys product and supervise and control the day-to-day operation. She decides business decisions needed in the production. She manages all the transactions regarding purchases of materials necessary in production and monitors, strictly, the controls used to manage the quality of the product. She supervises and directs production workers. She conducts regular supervision on the conditions of production and operation equipment, facilities and other assets. She also monitors and keeps the inventory records of raw materials and finished products ready for sale.

Capitalist- Industrial Partner (Financial Manager) - Michelle Ann M. Monsales A financial partner has the custody and responsibility of all the funds of the company. She plans the control and protection of assets and responsible for cash management. She keeps a complete and accurate record of receipts and disbursements and other commercial transactions entered into by the business. She prepares the annual budget and appropriations for the business. She is

24

responsible in setting the business standards with regards to internal controls in terms of financial matters. She is in-charge of preparation of payroll of employees salaries and wages based on current listing of rates and employees income tax returns, update and maintain all accounting records, focus must be on the financial operation of the company, prepares financial statements and its analyses, and responsible for computing taxes, contributions and the like.

Capitalist Partners (Kristel Mae V. Unciano and Kathleen Marie V. Novida) The capitalist partners are partners who contribute money or property to the capital of the partnership, shares profits and losses of the firm, and fully liable for the partnerships debts.

2. CASHIER In charge of companys transactions of all business operation regarding sales receipts and disbursements Responsible in preparing daily cash collection report containing summary of the days collection and remits/submits them to the financial manager. Responsible in the custody of the petty cash fund. 3. INVENTORY CLERK Responsible in checking and recording goods delivered to and received by the company as to quality and quantity. Reports directly to the Production Manager with regards to the condition, sufficiency and availability of raw materials needed in the production. Conducts an inventory count in order to avoid cases of theft, wastages, spoilages and other matters regarding inventories. Maintains record of finished goods ready for sale. 4. PRODUCTION WORKER Responsible for the production of the companys product Conduct regular repair and maintenance of the equipment, facilities and other assets used in the production. Responsible in reporting to the production manager regarding any disruptions in the production to avoid delay and destruction in the operation and production. Required to follow the quality controls, standards and discipline in the production. 5. DELIVERY MAN/ DRIVER Shall deliver goods to designated customers with due diligence. Bring ordered materials to the factory. Responsible in the repair and maintenance of delivery truck that they will be driving

25 Responsible in reporting accidents, defects and unusual conditions to the sales/marketing manager. 6. UTILITY MAN Responsible for the maintenance of cleanliness and good work conditions within the companys facilities and premises. Act as the messenger of the company. From time to time perform minor duties such as purchasing some groceries needed, replace light bulbs, repairs leaking faucets, and the like.

Basic policies in Employee Management 1. HIRING Recruitment, selection and hiring of employees shall be authorized and done by the partners. Applicants will be hired based on the aspects that meet the requirements in the qualifications enumerated for each position. 2. GENERAL EMPLOYMENT REGULATION a. EMPLOYER-EMPLOYEE RELATIONSHIP There will be employer-employee between the parties. The partners will be the employers and the production workers, inventory clerk, cashier, utility men, security guards, and delivery men will be the employees. The partners have the right to control and direct the employees, not only as to the result in accomplishing the work but also as to the details and means by which the result is accomplished. b. WORKING HOURS The working hours shall include all time during which an employee is required to be on duty at a prescribed workplace and all time during which an employee is permitted to work. Hours of work will be 8 hours a day. Rest periods or coffee breaks running from five to twenty minutes shall be considered compensated work time. The time during which an employee is inactive by reasons of interruptions in his works beyond his control shall be considered working time. 3. EMPLOYEE SALARY, PREMIUM COMPENSATION AND BENEFITS a. Salaries and Wages Salaries of all employees are above the basic minimum wage in the City of Baguio. The salaries are paid every fifteenth (15th) and thirtieth (30th) of the month. b. 13th MONTH PAY All employees are entitled to a pay equivalent to one month of their basic pay. All thirteenth month pay are non-taxable. c. SSS/ Philhealth/ PAG-IBIG Contribution

26

The amount of money given to the employees is net of SSS, Philhealth and PAG-IBIG which are then remitted to the respective government agencies. All rates are based on the data provided by the three government agencies 4. OTHER PREMIUM COMPENSATION AND BENEFITS a. Sick Leave All employees are entitled to four (4) days sick leave with pay for every six (6) months of service. Sick Leaves not availed can be converted into cash payment. Sick leave Policy is in compliance with the Labor Code of the Philippines. b. Holiday/Rest day/Overtime/Night Shift differential All premiums will be computed in accordance with the Labor Code of the Philippines. c. Maternity Leave All female employees are entitled to receive a maternity benefit equivalent to 100% of her monthly basic pay. The Labor Code of the Philippines states that a sixty (60) days equivalent salary must be given for normal delivery or seventy-eight (78) days for caesarian section delivery. d. Paternity Leave All male employees are entitled to a seven day leave with full pay. This leave shall be granted before, during or after birth or after miscarriage by his legal spouse. The paternity leave with pay is granted for four deliveries only, including miscarriage. Paternity Leave is not convertible to cash. e. Separation Pay All employees are entitled to a separation pay if the termination of employment is for authorized cause as provided by law.

LEGAL REQUIREMENTS Procedure in the registration of partnership: 1. Verify and reserve the proposed partnership name. After paying the registration fee, the partnership will get a Name Verification Slip, which is submitted together with the other requirements. 2. Prepare the Articles of Partnership. 3. File the complete documents with the SEC upon payment of the requisite filing fees. 4. Acquire business name registration certificate at the Department of Trade and Industry. 5. Proceed to the local municipality where the business is located to acquire business permit (1/2 of 1% of invested capital). 6. After acquiring business permit, proceed to the Bureau of Internal Revenue to have a Tax Identification Number (TIN). 7. After the BIR process, get hold a Social Security System (SSS), Philheath and Pagibig Certificate.

27 8. Project Schedule Activity Feasibility Study Procurements of funds Accomplishment of legal requirements Construction of building Purchased of equipments Installation and testing of equipments Hiring & training of employees Installation of accounting system & purchase of materials Start of Operation 2011 Activities Feasibility study Acquisition of funds Accomplishment of legal requirements Construction of Building A Purchased of Equipments Installation of Equipments Hiring & training of employees Installation of accounting system & purchase of materials Start of Operation To start this business, we first study if this business is feasible after which we decided to contribute funds and loan for us to have a capital. Then next is, to obtain all the legal requirements needed to operate the business. The purchasing of equipment is simultaneously done together with the construction of building. Since setting-up the business will be done on December 2012, the projected start of the operation of the business is on January 2013. Aug Sept Oct Nov Dec Jan Feb Mar April May Period 5 months 1 month 1 month 10 months 1 month and 2 weeks 2 weeks 1 month 2 weeks Jan 2013 2012 June July Aug Sept Oct Nov Dec 2013 Jan

FINANCIAL STUDY

28

FINANCIAL STUDY

I. Major Assumptions Production Capacity and Volume MONTAVUERDE would be operating for 300 production days or 2,400 hours yearly. The normal capacity for the first year of operations is 3,600 stone pavers each day. The production volume will be consistent for the first 5 years of operations.

Sales For the first year of operations, the company is still establishing its name to the market so its sales would only be 70% of total production. For the succeeding years, the company will be known already to the market so the sales will increased by 5%. The total sales after sales return and allowances are set at 2% of the total gross sales. There would be an annual increase of P1.50 in the selling price per year. This increase is based on the estimates of the dealers on their purchase of stone pavers since they do not want to provide contact information of the manufacturer where they purchased their stone pavers.

Petty cash fund Petty cash fund will be assumed to be P5,000 and imprest fund system will be used.

Credit Terms The company allows one (1) month credit term to its customers. It will also give 2% sales discount for first 10 days after the sale to customers to speed up the collection of receivables.

Allowance for Bad Debt Allowance for bad debt is set at 10% of the outstanding accounts receivable based on the experience of the First Premiere Finishing Centre on their sales of stone pavers to contractors. This was used as the basis since the said dealer does not want to provide us the contact information of the manufacturer where they purchased their stone pavers.

Collection Policy The researchers assumed 90% of the total credit sales can be collected every year.

Price Level Changes As provided by NSO, the proponents made used of 3.9% average inflation rate per commodity prevailing in CAR in 2012 in computing the costs and expenses incurred by the company.

29

Value Added Tax The amount presented in the face of the financial statements would be net of Output (Input) Tax. The Value Added Tax payable is computed as the difference between the Output Tax and the Input Tax, and is assumed to be payable every quarter.

Accounts Payable Accounts payable is assumed to be equal to the purchases of direct materials on the month of December.

Inventory End The inventory end for the first three years of operations is assumed to be 30% of the production. For the next years, it will decrease by 5%. These are the goods that are not included or scheduled for delivery during the month.

Raw Material Inventory Ending inventory for raw materials for the first year shall be equal to ten (10) days requirement for the following year. For the succeeding years, the inflation rate of 3.9% shall be applied in coming up with the cost. No work in process inventory shall be maintained since the cement-sand-water mixture will be hardened if left unprocessed.

Depreciation The company employs straight line method of depreciating the machineries and equipment.

Salaries Expense It is assumed that salaries of employees will increase by 5% every two years.

Utilities Expense Utilities comprises of electricity, water, and communication expense. The electricity expense and water expense will be divided: 30% for Administrative Building and 70% for Production Building. Communication expense is an expense of the Admininistrative Building. The increase per year for utilities expense will be the inflation rate of 3.9%.

Supplies expense The price of the supplies will be assumed to increase by 3.9% inflation rate annually.

30

Property, Plant and Equipment The cost of the machineries and equipment would be treated as capitalized expense in which the acquisition cost is more than P5,000. The depreciation method of the equipment would be straight line method.

Benefits to Employees The partnership provides the benefit to its employees such as SSS, and PAGIBIG. They are deducted from the gross salaries of employees based on the contribution schedule provided by the said agencies. 13 Month Pay will be provided to all employees annually.
th

Income Tax Thirty percent (30%) tax rate will be used as a basis in computing the income tax of the company.

Organizational Costs Every business establishments are indeed required to register from Securities and Exchange Commission, Department of Trade and Industry, Bureau of Internal Revenue, the Local Municipality.

Maintenance Maintenance expense for equipment and machineries will be provided by CMC Machineries. It shall be at 1% of the cost and will increase 3.9% inflation rate for the succeeding years based on the computed expense for the first year. This was derived from the DOST estimation.

Withdrawals Each partner will be allowed to withdraw 10% of net income for the year.

Equity The partners will be investing an initial amount of P 2,500,000 each.

II. Total Project Costs

Total Project Cost Unit cost Land (P3,500/sq.m. x 1,200 sq.m.)* Building Admin Building (Bldg A)** Production Building (Bldg B)** P 4,200,000.00 Quantity 1 Total costs P 4,200,000.00 1,525,000.00 3,055,000.00 P 4,200,000.00

4,580,000.00

31

Machineries Hydraulic concrete mixer Plastic Shredder Auto Paver Making Machine BW-119 Hinged Steel Belt Conveyor (set) Factory Tools and Equipment Industrial Weighing Scale Chapin 4gal Commercial Backpack Sprayer Fire Extinguisher Exhaust Fan Floor polisher Wheel barrow Water Hose Push Carts Factory Suit Delivery Equipment Isuzu Delivery Truck Office Equipments Computer Telephone w/ fax Wall clock Calculator (14D Calcu 2way) Printer Trash can Magazine Box open White Board (36x24) Cork Board (2X3WW) Scissors Stapler Puncher Office Furniture and Fixtures Office table Chairs Filing cabinets Cash Box Factory Furniture and Fixtures Monoblock chairs Table Production cost (first 3 months)*** Factory Supplies (for 3 months) Plantex All-in-One Solution Odor Eliminator Creston Dust Masks Creston Gloves Total Factory Supplies Office Supplies (for 3 months) Vouchers

90,000.00 350,000.00 400,000.00 200,000.00 4,000.00 1,500.00 999.75 1,179.75 23,649.75 1,850.00 1,159.75 1,350.00 589.75 250,000.00 18,000.00 4,480.00 209.00 680.00 2,300.00 1,349.75 138.50 820.00 465.00 50.25 196.50 235.00 2,000.00 550.00 3,000.00 1,599.75 300.00 2,000.00

2 1 1 2 1 1 2 4 1 2 2 1 4 2 2 1 1 3 1 1 3 1 1 2 2 1 4 4 2 1 4 1

180,000.00 350,000.00 400,000.00 400,000.00 4,000.00 1,500.00 1,999.50 4,719.00 23,649.75 3,700.00 2,319.50 1,350.00 2,359.00 500,000.00 36,000.00 4,480.00 209.00 2,040.00 2,300.00 2,749.75 415.50 820.00 465.00 100.50 393.00 235.00 8,000.00 2,200.00 6,000.00 1,599.75 1,200.00 2,000.00 (4,459,773.83/300 days) x 75 days

1,330,000.00

45,596.75 500,000.00

50,207.75

17,799.75

3,200.00 1,114,943.46

640.00 19.75 54.75

1 4 4

640.00 118.50 328.50

1,087.00

51.25

307.50

32

Official Receipts Delivery Receipt Receiving Report Long and short coupon bond White board Marker Ballpens (set-3) Selling and Administrative Salary expense Communication expense Advertising expense Security Expense Taxes and Licenses Filing fee with SEC DTI Registration BIR registration Business permit LTO registration Notary public Total Project Costs

47.75 40.00 64.75 360.00 42.50 10.50

3 3 3 2 1 3

143.25 120.00 194.25 720.00 42.50 31.50 (279,500/300days) x 75 days (27,500/300 days) x 75 days (35,000/300 days) x 75 days (15,000/300 days) x 75 days 26,000.00 500.00 500.00 66,125.00 1,400.00 500.00

1,559.00 69,875.00 6,875.00 8,750.00 3,750.00

95,025.00 12,028,668.71

*Based on Seller's Price **Based on City Buildings & Architecture Office (CBAO) Estimation ***Refer to Production cost (Schedule B)

III. Source of Financing Any business would adopt several financing sources such as loans and personal investments, in order to start with their respective operations. Current inquiries into the lending practices of the banks require a business to have at least three year operations which therefore eliminates this option of financing this startup business. Each partner will invest an amount of P 2,500,000.00 for initial contribution. This P 2,500,000 comes from the partners inheritance, personal loan, individual income, and savings. The personal loan will be at the risk of the partner and not of the partnership. The partners are confident to invest this big amount because they believe that this business will become profitable in the future. They are certain that this business will return their investments after profitable years of operation.

33

IV. PRO-FORMA FINANCIAL STATEMENTS

MONTAVUERDE PROJECTED STATEMENT OF FINANCIAL OPERATION For the years ended December 31, 2013, 2014, 2015, 2016, and 2017 (In Philippine Peso) Schedule Net Sales Cost of Goods Sold Gross Profit Operating Expenses: Selling and Administrative Expenses Net Income from Operations Other Income Net Income before Tax Less: Income Tax expense Net Income after Tax D 710,498.83 703,659.49 0 703,659.49 211,097.85 492,561.64 693,393.02 787,371.76 0 787,371.76 236,211.53 551,160.23 756,452.13 1,679,143.18 0 1,679,143.18 503,742.95 1,175,400.23 781,437.22 3,082,199.57 0 3,082,199.57 924,659.87 2,157,539.70 850,424.19 4,464,285.10 0 4,464,285.10 1,339,285.53 3,124,999.57 A C 2013 4,536,000.00 3,121,841.68 1,414,158.32 2014 6,024,375.00 4,543,610.22 1,480,764.78 2015 7,560,000.00 5,124,404.69 2,435,595.31 2016 9,237,375.00 5,373,738.22 3,863,636.78 2017 11,056,500.00 5,741,790.71 5,314,709.29

34

ASSETS Current Assets Cash (note 1) Accounts Receivables Inventory Total Current Asset Non-Current Assets Property, Plant, Equipment Furniture and Fixtures Total Non-Current Assets TOTAL ASSETS LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilities Accounts Payable Accrued Utilities Payable Income Tax Payable VAT Payable SSS Payable Philhealth Payable PAG-IBIG Payable Withholding Tax Payable Total Current Liabilities Equity Guiawan, Capital Monsales, Capital Novida, Capital Peralta, Capital Unciano, Capital Total Equity Total Liabilities and Equity Note 1: Under Cashflow Statement

MONTAVUERDE PROJECTED STATEMENT OF FINANCIAL POSITION As of December 31, 2013, 2014, 2015, 2016, and 2017 (In Philippine Peso) Schedule 2013 2014 1,275,468.32 244,944.00 1,337,932.15 2,858,344.46 1,317,732.20 545,765.85 1,514,536.74 3,378,034.79

2015 2,073,443.52 899,429.27 1,281,101.17 4,253,973.96

2016 3,404,572.07 1,308,304.59 948,306.74 5,661,183.40

2017 5,139,917.89 1,774,525.13 637,976.75 7,552,419.77

R C

I J

10,306,723.08 16,499.82 10,323,222.90 13,181,567.36

10,115,227.85 14,249.86 10,129,477.71 13,507,512.50

9,923,732.63 11,999.90 9,935,732.52 14,189,706.48

9,732,237.40 9,749.94 9,741,987.34 15,403,170.74

9,540,742.18 7,499.98 9,548,242.15 17,100,661.92

S T U V X X X X

321,107.50 13,766.67 52,774.46 27,938.35 10,695.40 2,175.00 2,700.00 4,129.16 435,286.54

332,667.37 14,042.00 59,052.88 60,189.75 10,695.40 2,175.00 2,700.00 4,129.16 485,651.57

344,643.40 14,322.84 125,935.74 75,543.90 10,695.40 2,175.00 2,700.00 4,129.16 580,145.43

357,050.56 14,609.30 231,164.97 92,315.46 10,695.40 2,175.00 2,700.00 4,129.16 714,839.84

369,904.38 14,901.48 334,821.38 110,504.44 10,695.40 2,175.00 2,700.00 4,129.16 849,831.24

2,549,256.16 2,549,256.16 2,549,256.16 2,549,256.16 2,549,256.16 12,746,280.82 13,181,567.36

2,604,372.19 2,604,372.19 2,604,372.19 2,604,372.19 2,604,372.19 13,021,860.94 13,507,512.50

2,721,912.21 2,721,912.21 2,721,912.21 2,721,912.21 2,721,912.21 13,609,561.05 14,189,706.48

2,937,666.18 2,937,666.18 2,937,666.18 2,937,666.18 2,937,666.18 14,688,330.90 15,403,170.74

3,250,166.14 3,250,166.14 3,250,166.14 3,250,166.14 3,250,166.14 16,250,830.68 17,100,661.92

35

Initial Investment Share in Net Income Total Withdrawals Ending Capital Balances

Beginning Capital Balance Share in Net Income Total Withdrawals Ending Capital Balances

Beginning Capital Balance Share in Net Income Total Withdrawals Ending Capital Balances

Beginning Capital Balance Share in Net Income Total Withdrawals Ending Capital Balances

Beginning Capital Balance Share in Net Income Total Withdrawals Ending Capital Balances

MONTAVUERDE PROJECTED STATEMENT OF CHANGES IN EQUITY For the years ended December 31, 2013, 2014, 2015, 2016, and 2017 (In Philippine Peso) 2013 Guiawan Monsales Novida Peralta 2,500,000.00 2,500,000.00 2,500,000.00 2,500,000.00 98,512.33 98,512.33 98,512.33 98,512.33 2,598,512.33 2,598,512.33 2,598,512.33 2,598,512.33 49,256.16 49,256.16 49,256.16 49,256.16 2,549,256.16 2,549,256.16 2,549,256.16 2,549,256.16 2014 Guiawan Monsales Novida Peralta 2,549,256.16 2,549,256.16 2,549,256.16 2,549,256.16 110,232.05 110,232.05 110,232.05 110,232.05 2,659,488.21 2,659,488.21 2,659,488.21 2,659,488.21 55,116.02 55,116.02 55,116.02 55,116.02 2,604,372.19 2,604,372.19 2,604,372.19 2,604,372.19 2015 Guiawan Monsales Novida Peralta 2,604,372.19 2,604,372.19 2,604,372.19 2,604,372.19 235,080.05 235,080.05 235,080.05 235,080.05 2,839,452.23 2,839,452.23 2,839,452.23 2,839,452.23 117,540.02 117,540.02 117,540.02 117,540.02 2,721,912.21 2,721,912.21 2,721,912.21 2,721,912.21 2016 Guiawan Monsales Novida Peralta 2,721,912.21 2,721,912.21 2,721,912.21 2,721,912.21 431,507.94 431,507.94 431,507.94 431,507.94 3,153,420.15 3,153,420.15 3,153,420.15 3,153,420.15 215,753.97 215,753.97 215,753.97 215,753.97 2,937,666.18 2,937,666.18 2,937,666.18 2,937,666.18 2017 Guiawan Monsales Novida Peralta 2,937,666.18 2,937,666.18 2,937,666.18 2,937,666.18 624,999.91 624,999.91 624,999.91 624,999.91 3,562,666.09 3,562,666.09 3,562,666.09 3,562,666.09 312,499.96 312,499.96 312,499.96 312,499.96 3,250,166.14 3,250,166.14 3,250,166.14 3,250,166.14

Unciano 2,500,000.00 98,512.33 2,598,512.33 49,256.16 2,549,256.16 Unciano 2,549,256.16 110,232.05 2,659,488.21 55,116.02 2,604,372.19 Unciano 2,604,372.19 235,080.05 2,839,452.23 117,540.02 2,721,912.21 Unciano 2,721,912.21 431,507.94 3,153,420.15 215,753.97 2,937,666.18 Unciano 2,937,666.18 624,999.91 3,562,666.09 312,499.96 3,250,166.14

Total 12,500,000.00 492,561.64 12,992,561.64 246,280.82 12,746,280.82 Total 12,746,280.82 551,160.23 13,297,441.05 275,580.11 13,021,860.94 Total 13,021,860.94 1,175,400.23 14,197,261.16 587,700.11 13,609,561.05 Total 13,609,561.05 2,157,539.70 15,767,100.75 1,078,769.85 14,688,330.90 Total 14,688,330.90 3,124,999.57 17,813,330.47 1,562,499.78 16,250,830.68

36

MONTAVUERDE PROJECTED STATEMENT OF CASH FLOWS For the years ended December 31, 2013, 2014, 2015, 2016, and 2017 (In Philippine Peso) 2013 2014 2015 Operating Net Icome Increase in Receivable Increase(decrease) in Inventory Depreciation Increase in Accounts Payable Income Tax Payable VAT Payable SSS Payable Philhealth Payable PAG-IBIG Payable Withholding Tax Payable Increase(decrease) in Accrued Payables Total Investing Purchase of PPE Purchase of Furniture and Fixtures Total Financing Initial Investment Withdrawals Total Net Cash Flow Add: Cash Beginning Cash Ending Note: Refer to Balance Sheet For investing activities, refer to PPE (Schedule I) 12,500,000.00 (246,280.82) 12,253,719.18 1,275,468.32 1,275,468.32 (275,580.11) (275,580.11) 42,263.88 1,275,468.32 1,317,732.20 (587,700.11) (587,700.11) 755,711.32 1,317,732.20 2,073,443.52 (10,498,218.30) (18,749.78) (10,516,968.08) 492,561.64 (244,944.00) (1,337,932.15) 193,745.19 321,107.50 52,774.46 27,938.35 10,695.40 2,175.00 2,700.00 4,129.16 13,766.67 (461,282.78) 551,160.23 (300,821.85) (176,604.59) 193,745.19 11,559.87 6,278.42 32,251.40 275.33 317,844.00 1,175,400.23 (353,663.42) 233,435.57 193,745.19 11,976.03 66,882.86 15,354.14 280.84 1,343,411.43

2016 2,157,539.70 (408,875.32) 332,794.43 193,745.19 12,407.16 105,229.23 16,771.56 286.46 2,409,898.40 (1,078,769.85) (1,078,769.85) 1,331,128.55 2,073,443.52 3,404,572.07

2017 3,124,999.57 (466,220.54) 310,330.00 193,745.19 12,853.82 103,656.41 18,188.98 292.19 3,297,845.61 (1,562,499.78) (1,562,499.78) 1,735,345.82 3,404,572.07 5,139,917.89

37

MONTAVUERDE FIVE YEARS PROJECTED SALES SCHEDULE A 2013 5,292,000.00 105,840.00 544,320.00 4,536,000.00 3,175,200.00 1,360,800.00 2014 6,885,000.00 137,700.00 722,925.00 6,024,375.00 4,217,062.50 1,807,312.50 2015 8,640,000.00 172,800.00 907,200.00 7,560,000.00 5,292,000.00 2,268,000.00 2016 10,557,000.00 211,140.00 1,108,485.00 9,237,375.00 6,466,162.50 2,771,212.50 2017 12,636,000.00 252,720.00 1,326,780.00 11,056,500.00 7,739,550.00 3,316,950.00

Total Sales Less Sales Return and Allowances Output Tax Net Sales Cash Sales (Note 1) Credit Sales (Note 2) Note 1: 70% of Total net sales Note 2: 30% of Total net sales

MONTAVUERDE FIVE YEAR PROJECTED SALES SUMMARY SCHEDULE A.1 Year Sales 2013 2014 2015 2016 2017 Total Production per day (a) 3,600 3,600 3,600 3,600 3,600 Operating days in a year (b) 300 300 300 300 300 Annual Production (axb) 1,080,000.00 1,080,000.00 1,080,000.00 1,080,000.00 1,080,000.00 Units Sold 756,000.00 810,000.00 864,000.00 918,000.00 972,000.00 Price 7.00 8.50 10.00 11.50 13.00 Gross Sales 5,292,000.00 6,885,000.00 8,640,000.00 10,557,000.00 12,636,000.00 44,010,000.00 Sales Return 105,840.00 137,700.00 172,800.00 211,140.00 252,720.00 880,200.00 Total Sales 5,080,320.00 6,747,300.00 8,467,200.00 10,345,860.00 12,383,280.00 43,023,960.00 Output tax 544,320.00 722,925.00 907,200.00 1,108,485.00 1,326,780.00 4,609,710.00 Net Sales 4,536,000.00 6,024,375.00 7,560,000.00 9,237,375.00 11,056,500.00 38,414,250.00

38

MONTAVUERDE PRODUCTION COST SCHEDULE B Direct Materials Raw Materials, beginning Purchases (Schedule E) Available for used Raw materials, end (Schedule F) Direct materials used Direct labor (Schedule K) Factory Overhead Employer's contribution (Schedule L) Indirect labor (Schedule K) Utilities (Schedule M) Factory Supplies Expense (Schedule G) Depreciation Factory Equipment (Schedule I.1) Depreciation Factory Furniture and Fixtures (Schedule J) Maintenance - Machinery and Equiment (Schedule O) Total Production Cost 55,803.36 195,000.00 98,840.00 3,037.95 129,503.84 514.29 14,500.00 4,459,773.83 55,803.36 195,000.00 102,587.03 3,156.43 129,503.84 514.29 15,065.50 4,720,214.82 55,803.36 204,750.00 106,476.32 3,279.53 129,503.84 514.29 15,653.05 4,890,969.12 55,803.36 204,750.00 110,513.27 3,407.43 129,503.84 514.29 16,263.52 5,040,943.79 55,803.36 243,655.10 114,703.49 3,540.32 129,503.84 514.29 16,897.80 5,431,460.71 2013 3,763,008.00 3,763,008.00 125,433.60 3,637,574.40 325,000.00 2014 125,433.60 3,898,476.29 4,023,909.89 130,325.51 3,893,584.38 325,000.00 2015 130,325.51 4,038,821.43 4,169,146.94 135,408.21 4,033,738.74 341,250.00 2016 135,408.21 4,184,219.01 4,319,627.21 140,689.13 4,178,938.09 341,250.00 2017 140,689.13 4,334,850.89 4,475,540.02 146,176.00 4,329,364.01 537,478.50

39

MONTAVUERDE FIVE YEARS PROJECTED COST OF GOODS SOLD SCHEDULE C Direct Materials Raw Materials, Beginning Purchase (Schedule E) Available for used Raw Materials, End (Schedule F) Direct Materials Used Direct Labor (Schedule K) Factory Overhead Employer's Contribution (Schedule L) Indirect Labor (Schedule K) Utilities (Schedule M) Factory supplies expense (Schedule G) Depreciation Factory Equipment (Schedule I.1) Depreciation Factory Furniture and Fixtures (Schedule J) Maintenance - Machinery and Equiment (Schedule O) Manufacturing Cost Work-in-Process, Beginning Cost of Goods put into Process Work-in -process, End Cost of Goods Manufactured Finished Goods, Beginning Cost of Goods Available for Sale Finished Goods, End Cost of Goods Sold 2013 0.00 3,763,008.00 3,763,008.00 125,433.60 3,637,574.40 325,000.00 55,803.36 195,000.00 98,840.00 3,037.95 129,503.84 514.29 14,500.00 4,459,773.83 0.00 4,459,773.83 0.00 4,459,773.83 4,459,773.83 1,337,932.15 3,121,841.68 2014 125,433.60 3,898,476.29 4,023,909.89 130,325.51 3,893,584.38 325,000.00 55,803.36 195,000.00 102,587.03 3,156.43 129,503.84 514.29 15,065.50 4,720,214.82 0.00 4,720,214.82 0.00 4,720,214.82 1,337,932.15 6,058,146.97 1,514,536.74 4,543,610.22 2015 130,325.51 4,038,821.43 4,169,146.94 135,408.21 4,033,738.74 341,250.00 55,803.36 204,750.00 106,476.32 3,279.53 129,503.84 514.29 15,653.05 4,890,969.12 0.00 4,890,969.12 0.00 4,890,969.12 1,514,536.74 6,405,505.86 1,281,101.17 5,124,404.69 2016 135,408.21 4,184,219.01 4,319,627.21 140,689.13 4,178,938.09 341,250.00 55,803.36 204,750.00 110,513.27 3,407.43 129,503.84 514.29 16,263.52 5,040,943.79 0.00 5,040,943.79 0.00 5,040,943.79 1,281,101.17 6,322,044.96 948,306.74 5,373,738.22 2017 140,689.13 4,334,850.89 4,475,540.02 146,176.00 4,329,364.01 537,478.50 55,803.36 243,655.10 114,703.49 3,540.32 129,503.84 514.29 16,897.80 5,431,460.71 0.00 5,431,460.71 0.00 5,431,460.71 948,306.74 6,379,767.45 637,976.75 5,741,790.71

40

MONTAVUERDE FIVE YEARS PROJECTED SELLING AND ADMINISTRATIVE EXPENSE SCHEDULE D 2013 Salary Expenses (Schedule K) Employer's Contribution (Schedule L) Office Supplies Expense (Schedule H) Depreciation-PPE (Schedule I1) Depreciation-Furniture and Fixtures (Schedule J) Utilities Expense (Schedule M) Taxes and Licenses Expense (Schedule N) Advertising Expense (Schedule P) Security Expense (Schedule Q) Bad Debt Expense (Schedule R.2) Total 279,500.00 28011.84 2,158.93 61,991.39 1,735.67 164,860.00 95,025.00 35,000.00 15,000.00 27,216.00 710,498.83 2014 279,500.00 54776.64 2,243.13 61,991.39 1,735.67 171,289.54 36,482.00 36,365.00 15,585.00 33,424.65 693,393.02 2015 293,475.00 54776.64 2,330.61 61,991.39 1,735.67 177,969.83 43,685.00 37,783.24 16,192.82 66,511.94 756,452.13 2016 293,475.00 54776.64 2,421.50 61,991.39 1,735.67 184,910.66 47,190.00 39,256.78 16,824.33 78,855.24 781,437.22 2017 308,148.88 54776.64 2,515.94 61,991.39 1,735.67 192,122.17 52,551.00 40,787.80 17,480.48 118,314.22 850,424.19

MONTAVUERDE FIVE YEARS PROJECTED RAW MATERIALS PURCHASES SCHEDULE E 2013 Raw Materials used in production Raw Materials, End Total Less: Raw Materials, Beginning Raw Material Purchases 3,637,574.40 125,433.60 3,763,008.00 0.00 3,763,008.00 2014 3,893,584.38 130,325.51 4,023,909.89 125,433.60 3,898,476.29 2015 4,033,738.74 135,408.21 4,169,146.94 130,325.51 4,038,821.43 2016 4,178,938.09 140,689.13 4,319,627.21 135,408.21 4,184,219.01 2017 4,329,364.01 146,176.00 4,475,540.02 140,689.13 4,334,850.89

41

MONTAVUERDE RAW MATERIALS (BREAKDOWN) SCHEDULE E.1 Raw Materials Plastic Bags Plastic Bottles Cement Fine sand Total Raw Materials Units (a) 6 kilos 4 kilos 1.5 bags 5 cubic feet Quantity per cycle (b) 4 4 4 4 Production cycle per day ( c ) 8 8 8 8 (d) Quantity per day (a x b x c) 192 kilos 128 kilos 48 bags 160 cubic feet (e) Annual Operating days 300 300 300 300 Annual Quantity 192 128 48 160 528

Raw Materials Plastic Bags Plastic Bottles Cement Fine sand

Cost per unit (a) 2.83 20 140 17

MONTAVUERDE FIVE YEARS PROJECTED RAW MATERIALS, ENDING SCHEDULE F Quantity per day (b) Days after the annual period 192 kilos 10 128 kilos 10 48 bags 10 160 cubic feet 10

Total cost (a x b x c) 5,433.60 25,600.00 67,200.00 27,200.00 125,433.60 103.90% 130,325.51 103.90% 135,408.21 103.90% 140,689.13 103.90% 146,176.00

Total cost of Raw Materials ending for year 1 Multiply by annual Inflation rate (3.9%) Total cost of Raw Materials ending for year 2 Multiply by annual Inflation rate (3.9%) Total cost of Raw Materials ending for year 3 Multiply by annual Inflation rate (3.9%) Total cost of Raw Materials ending for year 4 Multiply by annual Inflation rate (3.9%) Total cost of Raw Materials ending for year 5 Note: See computation of Quantity per day on Schedule E.1

42

MONTAVUERDE FIVE YEARS PROJECTED FACTORY SUPPLIES EXPENSE SCHEDULE G 2013 FACTORY SUPPLIES Creston Dust Masks Creston Gloves Plantex Odor Eliminator Total factory supplies Gross Cost 474 328.50 2600.00 3,402.50 2014 Gross Cost 492.49 341.31 2,701.40 3,535.20 2015 Gross Cost 511.69 354.62 2,806.75 3,673.07 2016 Gross Cost 531.65 368.45 2,916.22 3,816.32 2017 Gross Cost 552.38 382.82 3,029.95 3,965.16

2013 FACTORY SUPPLIES Creston Dust Masks Creston Gloves Plantex Odor Eliminator Total factory supplies Net Cost 423.21 293.30 2,321.43 3,037.95

2014 Net Cost 439.72 304.74 2,411.96 3,156.43

2015 Net Cost 456.87 316.63 2,506.03 3,279.53

2016 Net Cost 474.69 328.98 2,603.77 3,407.43

2017 Net Cost 493.20 341.81 2,705.31 3,540.32

Input VAT FACTORY SUPPLIES Creston Dust Masks Creston Gloves Plantex Odor Eliminator Total Input VAT

Input VAT Rate 0.12 0.12 0.12

2013 Net Cost 50.79 35.20 278.57 364.55

2014 Net Cost 52.77 36.57 289.44 378.77

2015 Net Cost 54.82 38.00 300.72 393.54

2016 Net Cost 56.96 39.48 312.45 408.89

2017 Net Cost 59.18 41.02 324.64 424.84

43

MONTAVUERDE FIVE YEARS PROJECTED OFFICE SUPPLIES EXPENSE SCHEDULE H Unit OFFICE SUPPLIES Vouchers 3 Official Receipts 1 Delivery Receipt 1 Receiving Report 1 Long and short coupon bond 2 White board Marker 1 Ballpens (set-3) 3 Total Office Supplies 2013 Net Cost 1,647.32 511.61 428.57 693.75 1,928.57 75.89 112.50 2,158.93 Input VAT Rate 0.12 0.12 0.12 0.12 0.12 0.12 0.12

Times/yr 12 12 12 12 3 2 4

Price per unit 51.25 47.75 40 64.75 360 42.5 10.5

2013 Gross Cost 1845 573 480 777 2160 85 126 5,920.00 2016 Net Cost 1,847.67 573.83 480.70 778.13 2,163.13 85.12 126.18 2,421.50 2015 Net Cost 213.40 66.27 55.52 89.87 249.83 9.83 14.57 279.67

2014 Gross Cost 1,916.96 595.35 498.72 807.30 2,244.24 88.32 130.91 6,150.88 2017 Net Cost 1,919.73 596.21 499.44 808.47 2,247.49 88.44 131.10 2,515.94 2016 Net Cost 221.72 68.86 57.68 93.38 259.58 10.21 15.14 290.58

2015 Gross Cost 1,991.72 618.57 518.17 838.79 2,331.77 91.76 136.02 6,390.76

2016 Gross Cost 2,069.39 642.69 538.38 871.50 2,422.70 95.34 141.32 6,640.00

2017 Gross Cost 2,150.10 667.75 559.38 905.49 2,517.19 99.06 146.84 6,898.96

OFFICE SUPPLIES Vouchers Official Receipts Delivery Receipt Receiving Report Long and short coupon bond White board Marker Ballpens (set-3) Total Office Supplies INPUT VAT OFFICE SUPPLIES Vouchers Official Receipts Delivery Receipt Receiving Report Long and short coupon bond White board Marker Ballpens (set-3) Total Input VAT

2014 Net Cost 1,711.57 531.56 445.29 720.81 2,003.79 78.85 116.89 2,243.13 2013 Net Cost 197.68 61.39 51.43 83.25 231.43 9.11 13.50 259.07

2015 Net Cost 1,778.32 552.29 462.65 748.92 2,081.93 81.93 121.45 2,330.61 2014 Net Cost 205.39 63.79 53.43 86.50 240.45 9.46 14.03 269.18

2017 Net Cost 230.37 71.55 59.93 97.02 269.70 10.61 15.73 301.91

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MONTAVUERDE FIVE YEARS PROJECTED PPE COST AND RELATED ACCUMULATED DEPRECIATION SCHEDULE I 2013 HISTORICAL VALUE Production Selling and Administrative Total 8,483,211.38 2,015,006.92 10,498,218.30 8,483,211.38 2,015,006.92 10,498,218.30 8,483,211.38 2,015,006.92 10,498,218.30 8,483,211.38 2,015,006.92 10,498,218.30 8,483,211.38 2,015,006.92 10,498,218.30 2014 2015 2016 2017

ANNUAL DEPRECIATION EXPENSE Production Selling and Administrative Total ACCUMULATED DEPRECIATION Production Selling and Administrative Total BOOK VALUE Production Selling and Administrative Total 8,353,707.55 1,953,015.53 10,306,723.08 8,224,203.71 1,891,024.14 10,115,227.85 8,094,699.87 1,829,032.75 9,923,732.63 7,965,196.04 1,767,041.37 9,732,237.40 7,835,692.20 1,705,049.98 9,540,742.18 129,503.84 61,991.39 191,495.23 129,503.84 61,991.39 191,495.23 129,503.84 61,991.39 191,495.23 129,503.84 61,991.39 191,495.23 129,503.84 61,991.39 191,495.23

129,503.84 61,991.39 191,495.23

259,007.67 123,982.78 382,990.45

388,511.51 185,974.17 574,485.68

518,015.35 247,965.55 765,980.90

647,519.19 309,956.94 957,476.13

45

ANNUAL DEPRECIATION EXPENSE - PPE SCHEDULE I.1 Machineries Hydraulic concrete mixer Plastic Shredder Auto Paver Making Machine BW-119 Hinged Steel Belt Conveyor (set) Floor Polisher Total Machineries Factory Equipments Industrial Weighing Scale Chapin 4gal Commercial Backpack Sprayer Fire Extinguisher Exhaust Fan Wheel barrow Water hose Push Carts Factory Suit Total Factory Equipments Delivery Equipment Isuzu Delivery Truck Office Equipments Computer Telephone w/ fax Wall clock Calculator (14D Calcu 2way) Printer Trash can Magazine Box open White Board (36x24) Cork Board (2X3WW) Scissors Stapler Puncher Total Building Total Annual Depreciation Expense Quantity 2 1 1 2 1 Unit cost 90,000.00 350,000.00 400,000.00 200,000.00 23,649.75 Total Cost 180,000.00 350,000.00 400,000.00 400,000.00 23,649.75 1,353,649.75 Input VAT 19,285.71 37,500.00 42,857.14 42,857.14 2,533.90 145,033.90 Net Cost 160,714.29 312,500.00 357,142.86 357,142.86 21,115.85 1,208,615.85 Useful Life 15 20 20 20 10 Salvage Value 16,071.43 31,250.00 35,714.29 35,714.29 2,111.58 120,861.58 Annual Depreciation 9,642.86 14,062.50 16,071.43 16,071.43 1,900.43 57,748.64

1 1 2 4 2 2 1 4

4,000.00 1,500.00 999.75 1,179.75 1,850.00 1,159.75 1,350.00 589.75

4,000.00 1,500.00 1,999.50 4,719.00 3,700.00 2,319.50 1,350.00 2,359.00 21,947.00

428.57 160.71 214.23 505.61 396.43 248.52 144.64 252.75 2,351.46

3,571.43 1,339.29 1,785.27 4,213.39 3,303.57 2,070.98 1,205.36 2,106.25 19,595.54

1,959.55

3,527.20

250,000.00

500,000.00

53,571.43

446,428.57

20

44,642.86

20,089.29

2 1 1 3 1 1 3 1 1 2 2 1

18,000.00 4,480.00 209.00 680.00 2,300.00 1,349.75 138.50 820.00 465.00 50.25 196.50 235.00

36,000.00 4,480.00 209.00 2,040.00 2,300.00 1,349.75 415.50 820.00 465.00 100.50 393.00 235.00 12,807.75 4,580,000.00

3,857.14 480.00 22.39 218.57 246.43 144.62 44.52 87.86 49.82 10.77 42.11 25.18 1,372.26

32,142.86 4,000.00 186.61 1,821.43 2,053.57 1,205.13 370.98 732.14 415.18 89.73 350.89 209.82 11,435.49

3,214.29

5,785.71

5 35

1,143.55 1,000,000.00

2,058.39 102,286.00 191,495.23

4,580,000.00

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Furniture and Fixtures Production Monoblock Chairs Table

MONTAVUERDE FIVE YEARS PROJECTED FURNITURE AND FIXTURE COST AND RELATED ACCUMULATED DEPRECIATION SCHEDULE J Quantity Unit cost Total Cost Input VAT Net Cost Useful Life Salvage Value 4 1 300 2000 1,200.00 2,000.00 128.57 214.29 1,071.43 1,785.71 2,857.14 5 5 107.14 178.57

Annual Depreciation 192.86 321.43 514.29

Selling and Administrative Office table Swivel Chairs Filing cabinets Cash Box

4 4 2 1

2,000 550 3,000 1,599.75

8,000.00 2,200.00 6,000.00 1599.75

857.14 235.71 642.86 171.40

7,142.86 1,964.29 5,357.14 1,428.35 15,892.63 2016 2,857.14 2,057.14 800.00

10 5 10 5

714.29 196.43 535.71 142.83

642.86 353.57 482.14 257.10 1,735.67

Production Carrying Amount Accumulated Depreciation Book Value Selling and Administrative Carrying Amount Accumulated Depreciation Book Value

2013 2,857.14 514.29 2,342.86

2014 2,857.14 1,028.57 1,828.57

2015 2,857.14 1,542.86 1,314.29

2017 2,857.14 2,571.43 285.71

15,892.63 1,735.67 14,156.96

15,892.63 3,471.35 12,421.29

15,892.63 5,207.02 10,685.61

15,892.63 6,942.70 8,949.94

15,892.63 8,678.37 7,214.26

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MONTAVUERDE PROJECTED SALARIES EXPENSE SCHEDULE K No. of employees Direct Labor Workers Indirect Labor Inventory Clerk Utility Man(80%) Total General and Administrative Utility Man(20%) Delivery Man Cashier Total Total Salaries expense Total Cost 13th Month Pay 25,000 7,000 10,000 Annual Compensation (2013-2014) 325,000 91,000 104,000 195,000 Total Cost 13th Month Pay 26,250 7,350 10,500 Annual compensation (2015-2016) 341,250.00 95,550.00 109,200.00 204,750.00 Total Cost 13th Month Pay Annual compensation (2017) 537,478.50 100,327.50 143,327.60 243,655.10

4 1 2

25,000 7,000 10,000

26,250 7,350 10,500

41,344.50 7,717.50 11,025.20

41,344.50 7,717.50 11,025.20

2 2 1

2,500 14,000 7,000

2,500 14,000 7,000

6,500 182,000 91,000 279,500 799,500

2,625 14,700 7,350

2,625 14,700 7,350

6,825.00 191,100.00 95,550.00 293,475.00 839,475

2,756.30 15,435.00 7,717.50

2,756.30 15,435.00 7,717.50

7,166.38 200,655.00 100,327.50 308,148.88

MONTAVUERDE EMPLOYER'S CONTRIBUTION SCHEDULE L SSS Philhealth PAG-IBIG Total Employer's Contribution/month Total Employer's Contribution/Year Annual Employer's Annual Employer's Contribution (Production) Contribution (Gen.& Admin)

EMPLOYEES

Workers Inventory Clerk Utility Man Delivery Man Cashier Total

1,877.20 504.70 938.60 1,009.40 504.70 4,834.60

450.00 87.50 150.00 175.00 87.50 950.00

600.00 100.00 200.00 200.00 100.00 1,200.00

2,927.20 692.20 1,288.60 1,384.40 692.20 6,984.60

35,126.40 8,306.40 15,463.20 16,612.80 8,306.40 83,815.20

55,803.36 28,011.84

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MONTAVUERDE PROJECTED UTILITIES EXPENSE SCHEDULE M Annual Consumption Production Utilities Expense Electricity Expense Water Utility Expense Total Selling & Administrative Utilities expense Electricity Expense Water Fuel Expense Communication Expense Total 2013 62,930 35910 98,840.00 2013 26970 15390 95,000 27,500 164,860 2014 28,021.83 15,990.21 98,705.00 28,572.50 171,290 2014 65,384.27 37,202.76 102,587.03 2015 29,114.68 16,613.83 102,554.50 29,686.83 177,970 2015 67,934.26 38,542.06 106,476.32 2016 70,583.69 39,929.57 110,513.27 2016 30,250.15 17,261.77 106,554.12 30,844.61 184,911 2017 73,336.46 41,367.04 114,703.49 2017 31,429.91 17,934.98 110,709.73 32,047.55 192,122

Filing fee with SEC DTI Registration BIR registration Business permit LTO registration Notary public Total

MONTAVUERDE FIVE YEARS PROJECTED TAXES AND LICENCES EXPENSE SCHEDULE N 2013 2014 2015 26,000 500 500 500 500 66,125 34,582 41,785 1400 1400 1400 500 95,025.00 36,482.00 43,685.00

2016

2017

500 45,290 1400 47,190.00

500 50,651 1400 52,551.00

Hydraulic concrete mixer Plastic Shredder Auto Paver Making Machine BW-119 Hinged Steel Belt Conveyor (set) Total Maintenance Expense

MONTAVUERDE FIVE YEARS PROJECTED MAINTENANCE EXPENSE SCHEDULE O 2013 2014 1,900 1,974 3600 3,740 4600 4,779 4400 4,572 14,500 15,066

2015 2,051 3,886 4,966 4,750 15,653

2016 2,131 4,038 5,159 4,935 16,264

2017 2,214 4,195 5,361 5,128 16,898

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Catalog Website Total Advertising Expense

MONTAVUERDE FIVE YEARS PROJECTED ADVERTISING EXPENSE SCHEDULE P 2013 2014 2015 10,000.00 10,390.00 10,795.21 25,000.00 25,975.00 26,988.03 35,000.00 36,365.00 37,783.24

2016 11,216.22 28,040.56 39,256.78

2017 11,653.66 29,134.14 40,787.80

Outsource Fee per security guard Multiply by: No. of security guards outsourced Total Security Expense

MONTAVUERDE FIVE YEARS PROJECTED SECURITY EXPENSE SCHEDULE Q 2013 2014 7,500.00 7,792.50 2 2 15,000.00 15,585.00

2015 8,096.41 2 16,192.82

2016 8,412.17 2 16,824.33

2017 8,740.24 2 17,480.48

MONTAVUERDE FIVE YEARS PROJECTED ACCOUNTS RECEIVABLE SCHEDULE R 2013 Beginning Accounts Receivable Credit Sales (Schedule A) Less: Collection Ending Accounts Receivable Less: Allowance end (Schedule R.1) Amortized Accounts Receivable 0.00 1,360,800.00 1,088,640.00 272,160.00 27,216.00 244,944.00 2014 272,160.00 1,807,312.50 1,473,066.00 606,406.50 60,640.65 545,765.85 2015 606,406.50 2,268,000.00 1,875,040.65 999,365.85 99,936.59 899,429.27 2016 999,365.85 2,771,212.50 2,316,906.59 1,453,671.77 145,367.18 1,308,304.59 2017 1,453,671.77 3,316,950.00 2,798,927.18 1,971,694.59 197,169.46 1,774,525.13

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FIVE YEARS PROJECTED ALLOWANCE FOR BAD DEBTS SCHEDULE R.1 Outstanding Accounts Receivable Percentage of Receivable Allowance for Bad Debts FIVE YEARS PROJECTED BAD DEBT EXPENSE SCHEDULE R.2 Ending Alllowance Beginning Allowance Provisions for Bad Debt 2013 27,216.00 0.00 27,216.00 2014 60,640.65 (27,216.00) 33,424.65 2015 99,936.59 (33,424.65) 66,511.94 2016 145,367.18 (66,511.94) 78,855.24 2017 197,169.46 (78,855.24) 118,314.22 2013 272,160.00 0.10 27,216.00 2014 606,406.50 0.10 60,640.65 2015 999,365.85 0.10 99,936.59 2016 1,453,671.77 0.10 145,367.18 2017 1,971,694.59 0.10 197,169.46

MONTAVUERDE FIVE YEARS PROJECTED ACCOUNTS PAYABLE SCHEDULE S 2013 Direct Materials December 321,107.50 2014 332,667.37 2015 344,643.40 2016 357,050.56 2017 369,904.38

MONTAVUERDE PROJECTED ACCRUED UTILITIES PAYABLE SCHEDULE T Monthly Consumption Electricity Expense Water Utility Expense Communication expense Total Accrued Utilities 2013 7,491.67 4,275.00 2,000.00 13,766.67 2014 7,641.50 4,360.50 2,040.00 14,042.00 2015 7,794.33 4,447.71 2,080.80 14,322.84 2016 7,950.22 4,536.66 2,122.42 14,609.30 2017 8,109.22 4,627.40 2,164.86 14,901.48

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INCOME TAX Total (Note 1) Divide by: Quarterly Payments Total Cash Outlay Quarterly Payments Multiply by: Total Cash Outlay Note: See Income Statement

MONTAVUERDE FIVE YEARS PROJECTED INCOME TAX PAYABLE SCHEDULE U 2013 2014 2015 211,097.85 236,211.53 503,742.95 4 4 4 52,774.46 59,052.88 125,935.74

2016 924,659.87 4 231,164.97

2017 1,339,285.53 4 334,821.38

52,774.46 3 158,323.38

59,052.88 3 177,158.65

125,935.74 3 377,807.22

231,164.97 3 693,494.90

334,821.38 3 1,004,464.15

MONTAVUERDE FIVE YEARS PROJECTED NET VAT PAYABLE SCHEDULE V NET VAT PAYABLE Output VAT (Schedule A.1) Less: Input VAT (Schedule G, H,I,J) Creditable Vat Payable Net VAT Payable 2013 544,320.00 209059.79 381024.00 335,260.21 2014 722,925.00 647.95 506047.50 722,277.05 2015 907,200.00 673.22 635040.00 906,526.78 2016 1,108,485.00 699.47 775939.50 1,107,785.53 2017 1,326,780.00 726.75 928746.00 1,326,053.25

Monthly VAT Payable Months Paid Total Cash Outflow

27,938.35 11 307,321.85

60,189.75 11 662,087.30

75,543.90 11 830,982.89

92,315.46 11 1,015,470.07

110,504.44 11 1,215,548.81

Monthly VAT Payable Months still due Accrued VAT Payable

27,938.35 1 27,938.35

60,189.75 1 60,189.75

75,543.90 1 75,543.90

92,315.46 1 92,315.46

110,504.44 1 110,504.44

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EMPLOYEES Workers Inventory Clerk Utility Man Delivery Man Cashier TOTAL

Total Compensation 37,500.00 7,000.00 12,500.00 14,000.00 7,000.00 78,000.00

SSS 1,900.20 233.30 433.40 466.60 233.30 3,266.80

PhilHealth 450.00 87.50 150.00 175.00 87.50 950.00

MONTAVUERDE PROJECTED WITHHOLDING TAX PAYABLE SCHEDULE W Total Employee's Taxable PAG-IBIG Contribution Income 600.00 2,950.20 34,549.80 100.00 420.80 6,579.20 200.00 783.40 11,716.60 200.00 841.60 13,158.40 100.00 420.80 6,579.20 1,200.00 5,416.80 72,583.20

500.00

1,727.49 328.96 585.83 657.92 328.96

Total per mo. 1,727.49 328.96 585.83 657.92 828.96 4,129.16

Total per year 20,729.88 3,947.52 7,029.96 7,895.04 9,947.52 49,549.92

MONTAVUERDE EMPLOYER'S CONTRIBUTION SSS,Philhealth,PAG-IBIG and Withholding Tax Payables SCHEDULE X Monthly Employee's share Monthly Employer's share Total Payable SSS 3,266.80 7,428.60 10,695.40 PhilHealth 950.00 1,225.00 2,175.00 PAG-IBIG 1,200.00 1,500.00 2,700.00 Withholding tax 4,129.16 0 4,129.16

MONTAVUERDE PAYBACK PERIOD SCHEDULE Y Year Cost of Investment to be Recovered Balance Net Cash Inflows 1,275,468.32 1,317,732.20 2,073,443.52 3,404,572.07 5,139,917.89 11,224,531.68 9,906,799.48 7,833,355.96 4,428,783.89 0.00 Payback years Required 1.00 1.00 1.00 1.00 0.14 4.14

1 12,500,000.00 2 11,224,531.68 3 9,906,799.48 4 7,833,355.96 5 4,428,783.89 Payback Period in Years

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V. Financial Analysis

The following tests of financial stability are conducted based on the pro-forma financial statement of the company. Test of Liquidity Current Ratio 2013 Current Assets Divided by: Current Liabilities Current Ratio 2,858,344.46 435,286.54 6.57 2014 3,378,034.79 485,651.57 6.96 2015 4,253,973.96 580,145.43 7.33 2016 5,661,183.40 714,839.84 7.92 2017 7,552,419.77 849,831.24 8.89

The company has the ability to pay its liabilities. During year 1, the company has 6.57 of its current asset to pay its indebtedness in the first year. The same is true for the next four years. It means that the company has the ability to pay its obligations as they come due without the need of borrowing. The company is just starting and venturing to riskier investment as early as now would only contribute to the pressure the company is experiencing during its early years. The company tries to become passive during these years to meet its short term objectives, however, sooner or later the company will extend outward to meet wider goals such as expansion; and extending outward means searching for better investments that yields higher return.

Accounts Receivable Turnover Credit Sales

2013 1,360,800.00 0 244,944.00 244,944.00 2 122,472.00

2014 1,807,312.50 244,944.00 545,765.85 790,709.85 2 395,354.93 4.57

2015 2,268,000.00 545,765.85 899,429.27 1,445,195.12 2 722,597.56 3.14

2016 2,771,212.50 899,429.27 1,308,304.59 2,207,733.85 2 1,103,866.93 2.51

2017 3,316,950.00 1,308,304.59 1,774,525.13 3,082,829.72 2 1,541,414.86 2.15

Divided by: Average Accounts Receivable

Accounts Receivable Turnover

11.11

As a result of the accounts receivable turnover, the company during the first year of operation collects its accounts due from customers for 11 times. This means that the company policy of collecting its due accounts is effective and thus, minimal would become uncollectible. Moreover, the accounts are quickly converted to a more liquid asset that could be used during the production period. On the succeeding years, the turnover decreases significantly, from this point of view, the receivables are

54

collected a month after they are incurred. The company must be stricter in their collection policy to improve the receivable turnover. The significant decrease is due to the increase of uncollectible accounts for the succeeding years. Average Age of Receivables Days Divided by: Accounts Receivable Turnover Turnover in Days 2013 300 11.11 27.00 2014 300 4.57 65.63 2015 300 3.14 95.58 2016 300 2.51 119.50 2017 300 2.15 139.41

Having lesser days to collect the receivables, the company is given narrower possibility of incurring uncollectible accounts for the first year. Moreover, the company is assured of available cash to be used in purchasing materials needed in the succeeding production. However, there is a significant increase in turnover which entails more uncollectible accounts for the succeeding years.

Inventory Turnover Cost of Sales Average inventory Inventory Turnover

2013

2014

2015

2016

2017

3,121,841.68 668,966.07 4.67

4,543,610.22 1,426,234.45 3.19

5,124,404.69 1,397,818.96 3.67

5,373,738.22 1,114,703.96 4.82

5,741,790.71 793,141.74 7.24

Average Inventory 0 1,337,932.15 1,337,932.15 2 668,966.07 1,337,932.15 1,514,536.74 2,852,468.89 2 1,426,234.45 1,514,536.74 1,281,101.17 2,795,637.91 2 1,397,818.96 1,281,101.17 948,306.74 2,229,407.92 2 1,114,703.96 948,306.74 637,976.75 1,586,283.49 2 793,141.74

The result shows that the inventory turnover decrease in the first 3 years and increases in the succeeding years. This is because the sales for inventory increases and ending inventory for the period decreases.

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Test of Solvency Debt-to-Net worth Ratio 2013 Total Liabilities Total Equity Debt-to-Net worth Ratio 435,286.54 12,746,280.82 0.03 2014 485,651.57 13,021,860.94 0.04 2015 580,145.43 13,609,561.05 0.04 2016 714,839.84 14,688,330.90 0.05 2017 849,831.24 16,250,830.68 0.05

This means that the creditor of the company is assured of company solvency during the first five years of its operation. Meaning there is higher possibility that the company can pay its accruing obligations to creditors have little reasons to worry since the company doesnt rely too much on outside financing. The owners contribution is still adequate to meet its obligations.

Test of Profitability Net Profit Margin 2013 Net Income After Tax Net Sales Net Profit Margin 492,561.64 4,536,000.00 0.109 2014 551,160.23 6,024,375.00 0.091 2015 1,175,400.23 7,560,000.00 0.155 2016 2,157,539.70 9,237,375.00 0.234 2017 3,124,999.57 11,056,500.00 0.283

The net profit margin of the company determines its profitability. The companys margin is at average. It means that company is operating at a rate in which total net sales cover all expenses incurred leaving sufficient amount for other activities. The ratio remains for the next 5 years. Even though 30% income tax rate is applicable during the periods, the company yields a high net profit margin, meaning, the companys sale is high that it wont be affected by the high income tax expense.

Operating Profit Margin 2013 Earnings before Interest and Taxes Net Sales Operating Profit Margin 703,659.49 4,536,000.00 0.155 2014 787,371.76 6,024,375.00 0.131 2015 1,679,143.18 7,560,000.00 0.222 2016 3,082,199.57 9,237,375.00 0.334 2017 4,464,285.10 11,056,500.00 0.404

The company yields a higher return on costs spent on producing the pavers. The income from operation is enough to cover these costs during the period. It is stable for the next years. In general, the companys overall operating margin is more than adequate.

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Gross Profit Margin 2013 Gross Profit Net Sales Gross Profit Margin 1,414,158.32 4,536,000.00 0.31 2014 1,480,764.78 6,024,375.00 0.25 2015 2,435,595.31 7,560,000.00 0.32 2016 3,863,636.78 9,237,375.00 0.42 2017 5,314,709.29 11,056,500.00 0.48

Gross profit margin indicates the average markup on products sold. From the result, margin became stable because the prices of the product increase yearly by the inflation rate. Return on Assets Earnings before Interest and Taxes Average Total Assets Return on Assets 2013 2014 2015 2016 2017

1,461,832.72 1,504,968.81 0.97

1,098,353.92 3,045,515.02 0.36

nd

1,124,314.19 3,125,344.56 0.36

1,132,659.91 3,213,585.60 0.35

1,163,449.95 3,303,590.81 0.35

Return on assets decrease significantly on the 2

year and stabilizes on the succeeding years.

This is because the companys assets increase consistently as the company accrues wealth (more assets) through continuous profitable operations.

Over-all analysis of the projected financial statements of the company:

The analysis of financial statements is important to know the financial health, effectiveness and dynamism of an organization. The researchers analyzed the companys financial statements as to its profitability, liquidity and solvency. As to its profitability, the companys profit margin is at average. The company is operating at a rate in which total net sales cover all expenses incurred leaving sufficient amount for other activities. As to its liquidity, the company has the ability to pay its obligations in cash as they mature. The company tries to become passive during these years to meet its short term objectives, however, sooner or later the company will extend outward to meet wider goals such as expansion; and extending outward means searching for better investments that yields higher return. As to its solvency, the creditor of the company is assured of company solvency during the first five years of its operation since the owners contribution is adequate to meet its obligations.

SOCIO-ECONOMIC STUDY

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SOCIO-ECONOMIC STUDY

Montavuerde is not only a company for profit but also a one for society and economical development. Montavuerde is gearing towards revenue generation and resources maximization concurrent with environmental benefits primarily through recycling. Every enterprise is not meant to benefit its owners alone. This chapter of the study will provide the effects of Pavertrax to the economy, to the government, and to the society. Even if most businesses are created for profit generation, they also have to look into the impact it has on the socio-economic of the communities affected. The researchers believe that a business with very positive socio-economic benefits will have a marketing advantage. The enterprise will not only focus on the benefits of the operating performance, the researchers will also consider the benefits which can contribute to the social and economic development of the country. In assessing the socio-economic benefits of the proposed corporation, the researchers have broken down the benefits in terms of the various areas of concern. I. Employment and Income Generation Recycling generates significant economic benefits for communities. In fact, the Office of the Federal Environmental Executive estimates that recycling and remanufacturing industries account for approximately one million manufacturing jobs and more than $100 billion in revenue (www.epa.gov). One of the major problems in our country would be unemployment. It has been a nagging problem that keeps haunting the government and never ceases to exist. Recycling employs low-, medium-, and highly-skilled workers in a variety of jobsfrom materials handling and processing to high-quality product manufacturing. The drive for efficient handling and use of recycled materials spurs innovation, a key to long-term economic growth. Investments in recycling equipment and the companies themselves also filter through the economy and contribute to economic growth. Expansion of the researchers business in the future is not impossible, because of hiring of personnel or workers in the future are part of Montavuerdes long life corporate plan. Through hiring of workers, we will be providing job opportunities to many individuals and would eventually minimize problems of unemployment and poverty. With the income that the employees will receive in the future, we will be able to help them improve their standard way of living as well as their human and sustainable development. II. Environmental Impact Equally important are the social and environmental benefits of recycling. Recycling promotes the sustainable use of our natural resources. Working together, recycling activities around the country

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promote community development while reducing the need for new landfills, preventing pollution, saving energy, and reducing greenhouse gas emissions. With its main product, Pavertrax it will reduce Baguio Citys biggest problem, which is the garbage since we are using recycled plastics. Recycling plastic helps the environment by reducing the amount of space used in a landfill for plastic products. Plastic takes years to break down, and when it does break down, it leaks chemicals into the ground. Plastic also ends up in the ocean, which not only defaces natural resources, but may also cause harm to ocean life. According to National Geographic, scientists have recently discovered, for example, that some plastics breakdown quickly in the ocean, releasing toxic chemicals during their decomposition process. The chemicals released as plastic breaks down are dangerous to ocean life and people. Montavuerde as an environment friendly corporation will comply with all government regulations protecting the environment.

III. Taxes Taxation is a power, process and a means of an Independent state, through its law-making body, raise and accumulate revenue from its inhabitants to pay the necessary expenses of the government. These Expenses are allocated to the different government units for the welfare of the public. Payment of proper taxes is one way of fulfilling the business responsibilities to the country. The establishment of the business entails additional revenue for the government. Taxes are the primary source of government functions. It is the lifeblood of the government. Increase in taxes collected by the government is also triggered by the rise of our business taxable income. Higher revenue of the business would mean higher payment of tax to the government. Due to the taxes collected from our business, there is a greater possibility of development of the community and the country as well. The symbiotic relationship between the government and the tax payer is enough to justify the need for payment of taxes. The Company pays its taxes while the government carries out its functions by rendering protection, security, safety, welfare and quality of life. One, the revenue that we will generate, will also generate taxes. Two, the income of the employees that we will hire will also be subjected to tax that will give rise to greater funds for the use of the society that will eventually help in our countrys development.

ACCOUNTING SYSTEM

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CHART OF ACCOUNTS BALANCE SHEET CURRENT ASSETS (100-116) A-100 Cash A-102 Petty Cash Fund A-104 Accounts Receivable A-104-B Allowance for Bad Debts A-106 Raw Materials A-108 Finished Goods A-110 Factory Supplies A-112 Office Supplies A-114 Prepaid Expense A-116 Input Tax NON- CURRENT ASSETS (220- 238) A-220 Land A-222 Administrative Building A-224 Factory Building A-226 Delivery Equipment A-228 Office Equipment A-230 Factory Equipment A-232 Office Furniture and Fixtures A-234 Factory Furniture and Fixtures A-236 Other Office Equipment A-238 Other Factory Equipment CONTRA- ACCOUNTS (300-316) A-300 Accumulated Depreciation Administrative Building A-302 Accumulated Depreciation- Factory Building A-304 Accumulated Depreciation Delivery Equipment A-306 Accumulated Depreciation Office Equipment A-308 Accumulated Depreciation Factory Equipment A-310 Accumulated Depreciation Office Furniture and Fixtures A-312 Accumulated Depreciation Factory Furniture and Fixtures A-314 Accumulated Depreciation Other Office Equipment A-316 Accumulated Depreciation- Other Factory Equipment LIABILITIES (400-416) L-400 Accounts Payable L-402 Accrued Expenses L-404 Output Tax L-406 VAT Payable L-408 SSS Payable L-410 PhilHealth Payable L-412 PAG-IBIG Payable L-414 Withholding Tax Payable L-416 Income Tax Payable EQUITY (502-510) P-502 Monsales, Capital P-504 Novida, Capital P-506 Peralta, Capital

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P-508 P-510

Unciano, Capital Withdrawals

INCOME STATEMENT SALES (600-602) S-600 Sales S-602 Sales Returns and Allowances PURCHASES (650- 652) P-650 Raw Materials Purchase P-652 Purchase Returns and Allowances EXPENSES PRODUCTION COST (700- 724) E-700 Salaries Direct Labor E-702 SSS Employer Share- Factory E-704 PAG-IBIG Employer share E-706 PhilHealth Employer Share th E-708 13 Month Pay Factory E-710 Indirect Labor Factory E-712 SSS Employer Share- Indirect Labor E-714 PAG-IBIG Employer Share Indirect Labor E-716 PhilHealth Employer Share Indirect Labor th E-718 13 Month Pay Production Indirect Labor E-720 Utilities Expense E-722 Factory Supplies Expense E-724 Repair and Maintenance Expense E-726 Depreciation Expense- Factory Equipment E-728 Depreciation Expense- Factory Furniture and Fixtures SELLING AND ADMINISTRATIVE EXPENSE (800-900) E-800 Salaries E-802 SSS Employer Share E-804 PAG-IBIG Employer Share E-806 PhilHealth Employer Share th E-808 13 Month Pay E-810 Income Tax Expense E-812 Utilities Expense E-814 Delivery Expense E-816 Advertising Expense E-818 Communication Expense E-820 Supplies Expense E-822 Security Expense E-824 Pre- operating Expenses E-826 Depreciation Expense - Equipment E-828 Depreciation Expense Furniture and Fixtures E-830 Bad Debt Expense TEMPORARY ACCOUNT E-900 Income Summary Expense

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CHART OF ACCOUNTS DESCRIPTION BALANCE SHEET CURRENT ASSETS A-100 Cash used mainly to purchase raw materials, supplies and other unexpected disbursements. Debited for cash receipts Credited for cash disbursements A-102 Petty Cash Fund used to pay for small, miscellaneous expenditures of the business. Debited for establishment of fund or increase in fund Credited for decrease in fund and year- end adjustments Accounts Receivable used to record sales that are on account. Debited for sales on account to customers Credited whenever the customer has paid the company or items are returned

A-104

A-104-B Allowance for Bad Debts used to record accumulated balance of customers accounts that are doubtful of collectability. Debited for excessive allowance; write-off accounts receivable Credited to record estimated doubtful accounts; recovery by written- off of accounts receivable A-106 Raw Materials used for accounting the raw materials used in the production. Debited for purchases of raw materials and for freights chargeable to purchases Credited when used in production and on purchases returns Finished Goods used to account for goods that have completed the process. It also the main inventory control of the warehouse. Debited for cost of finished goods and returned items by the sales agent Credited for cost of goods sold *Debited/Credited for any appropriate adjustments Factory Supplies used to account for the supplies used in the production. Debited for the purchased of production supplies Credited when expensed at the end of the year Office Supplies used for accounting the supplies used in the office. Debited for the purchased of the office supplies Credited when expensed at the end of the year Prepaid Expense- expenses paid and recorded as assets before they are used or consumed such as prepaid rent, prepaid insurance and prepaid advertising. Debited to prepaid expense Credited to cash or accounts payable if on account Input Tax- VAT charged to purchased cost input. Debited when purchasing items with VAT Credited when closed to VAT payable

A-108

A-110

A-112

A-114

A-116

NON-CURRENT ASSETS A-220 Land used to account for the acquisition cost used by the firm as a building site. Debited for the acquisition cost Credited for sales of the land

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A-222

Administrative Building used to account for the construction of the factory. Debited for the acquisition cost Credited for sales of the administrative building Factory Building used to account for the construction of the factory. Debited for the acquisition cost Credited for sales of the factory building Delivery Equipment records the acquisition cost of the vehicle. Debited for the acquisition cost Credited for sales of the vehicle Office Equipment used to account for the acquisition cost of equipment related to administration. Debited for acquisition cost of the office equipment Credited for sales of office equipment Factory Equipment used to account for the acquisition cost of factory equipment related to production. Debited for acquisition cost of the factory equipment Credited for sales of factory equipment Office Furniture and Fixture used to account for the acquisition cost of furniture and fixtures like office tables, filing cabinet, and chairs related to administration. Debited for the acquisition cost of office furniture and fixture Credited for sales of office furniture and fixtures or total breakdown and the items are considered junked Factory Furniture and Fixture used to account for the acquisition cost of factory furniture and fixtures like tables, and chairs related to production. Debited for the acquisition cost of factory furniture and fixture Credited for sales of factory furniture and fixtures or total breakdown and the items are considered junked Other Office Equipment- used to account for the acquisition cost of equipment related to administration. Debited for acquisition cost of the office equipment Credited for sales of office equipment Other Factory Equipment used to account for the acquisition cost of machineries and equipment related to production Debited for acquisition cost of the factory equipment Credited for sales of factory equipment Accumulated Depreciation Administrative Building -- used to account for the usage or expired cost of the building up to the present. Debited for the expired parts or parts of the building were destroyed Credited for the expensed portion of the administrative building Accumulated Depreciation Factory Building -- used to account for the usage or expired cost of the building up to the present. Debited for the expired parts or parts of the building were destroyed Credited for the expensed portion of the factory building

A-224

A-226

A-228

A-230

A-232

A-234

A-236

A-238

A-300

A-302

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A-304

Accumulated Depreciation Delivery Equipment used to account for the usage or expired cost of the delivery equipment up to the present. Debited for the sales of the delivery equipment or total breakdown and the items are considered junked. Credited for the expensed portion of the delivery equipment Accumulated Depreciation Office Equipment used to account for the usage or expired cost of the machineries and equipment used in administration. Debited for the sales of the office equipment or total breakdown and the items are considered junked Credited for the expensed portion of the office equipment Accumulated Depreciation Factory Equipment used to account for the usage or expired cost of the equipment used in the production. Debited for the sales of the factory equipment or total breakdown and the items are considered junked. Credited for the expensed portion of the factory equipment Accumulated Depreciation Office Furniture and Fixtures used to account for the usage or expired cost of the furniture and fixtures related to administration. Debited for the sales of the office furniture and fixtures or total breakdown and the items are considered junked. Credited for the expensed portion of the office furniture and fixtures Accumulated Depreciation Factory Furniture and Fixtures used to account for the usage or expired cost of the furniture and fixtures related to production Debited for the sales of the factory furniture and fixtures or total breakdown and the items are considered junked. Credited for the expensed portion of the factory furniture and fixtures Accumulated Depreciation Other Office Equipment - used to account for the usage or expired cost of the other Office Equipments. Debited for the sales of the other office equipment or total breakdown and the items are considered junked. Credited for the expensed portion of the other office equipment Accumulated Depreciation- Other Factory Equipment used to account for the usage or expired cost of the other Equipments use in factory. Debited for the sales of the other equipment- factory or total breakdown and the items are considered junked. Credited for the expensed portion of the other factory equipment

A-306

A-308

A-310

A-312

A-314

A-316

LIABILITIES L-400 Accounts Payable used to record the payable related to the purchase of raw materials. Debited whenever payments have been made Credited for the purchase of raw materials on credit L-402 Accrued Expenses used to account expenses that have occurred but are not yet recorded through the normal processing of transactions. Debited for when paid Credited for expenses incurred

64

L-404

Output Tax- charged to customers output. Debited when closed to VAT payable Credited when sales is made VAT Payable used to account for the value added tax payable to the Bureau of Internal Revenue. This tax is paid using output Vat less input vat method. Output VAT is calculated by using net sales multiplied by 12% as the partnership pricing is called VAT inclusive. Debited for output tax, if input tax is higher than the output tax debited to prepaid tax Credited for input tax and net VAT payable, if output tax is higher than input tax SSS Payable This account is used for both the employer share and employee share of the SSS. Payments to the SSS are made monthly and reconciled quarterly. Until the payments are due, company accumulated these amounts into this account. Debited for whenever actual payments are made to the SSS or an adjustment has to be made for errors in accounting Credited for the amount deducted from employee payroll and the SSS expense of the company for the employer share. These items are remitted monthly to the SSS with the employment compensation. PhilHealth Payable used to account for PhilHealth payable for the both the employer share and employee share. Debited for payments a made to the PhilHealth or an adjustment has to be made for errors in accounting. Credited for employee share deducted from payroll and the expense incurred by the employer PAG-IBIG Payable - used to account for PAG-IBIG payable for the both employer share and employee share. Debited for payments made to the PAG-IBIG or an adjustments has to be made for errors in accounting Credited for employee share deducted from payroll and the expense incurred by the employer Withholding Tax Payable used to account Income tax withheld from employees' wages and paid directly to the government by the employer. Debited for cash paid to BIR or an adjustments has to be made for errors in accounting Credited for employee share deducted from payroll Income Tax Payable used to record the accounts payable to the Bureau of Internal Revenue to settle the Income Tax. Every quarter as required, the company pays the estimated tax, however at the end of the year a final accounting is conducted and the amount due is paid on or before April 15 of the following year. Debited when final settlement is done Credited the current income taxes

L-406

L-408

L-410

L-412

L-414

L-416

Income Statement Sales S-600

Sales The primary source of income for the company. Accepts cash and checks received from sales of products. Debited when preparing closing entry Credited when customers purchased on cash or credit basis Sales Returns and Allowances used for accounting products returned by customers. Debited for amount of returns and damages

S-602

65

Credited when preparing closing entry Raw Materials Purchases P- 650 Raw Materials Purchases- used only for raw materials purchases to be used in the production. Debited when purchasing raw materials Credited when preparing closing entry P- 652 Purchase Returns and Allowances- used for returns and allowances of merchandise purchased. Debited when preparing closing entry Credited to return or allowances of merchandised purchased Production Cost E-702 SSS Employer Share Production used for accounting for production related SSS expense. Debited for SSS premium shares of the employer Credited when preparing closing entry E-704 PAG-IBIG Employer Share used for accounting for production-related employers share of the PAG-IBIG plan. Debited for Pag-ibig premium share of the employer Credited when preparing closing entry PhilHealth Employer Share used for accounting for production-related employers share of the Philhealth plan. Debited for PhilHealth premium share of the employer Credited when preparing closing entry 13 Month pay-Direct Labor used for accounting for the 13 month pay of the direct labor portion. th Debited for the expense portion of the 13 month pay Credited for adjustments, if any and when preparing closing entry Indirect Labor- Production used for accounting production-related supervisory salary. Debited for gross income of the production supervisor/ manager Credited for adjustments, if any and when preparing closing entry SSS Employer Share- Indirect Labor used for accounting for supervisor/ manager or production-related SSS Expense. Debited for SSS premium shares of the employer Credited when preparing closing entry PAG-IBIG Employer Share Indirect Labor used for accounting for supervisor/ manager of production- related employers share of the PAG-IBIG plan. Debited for Pag-ibig premium share of the employer Credited when preparing closing entry PhilHealth Employer Share used for accounting for supervisor/ manager of production-related employers share of the PhilHealth plan. Debited for PhilHealth premium share of the employer Credited when preparing closing entry 13 month pay- Indirect Labor used for accounting of 13 month pay of the indirect labor portion. th Debited for the expense portion of the 13 month pay Credited for adjustments, if any and when preparing closing entry
th th th th

E-706

E-708

E-710

E-712

E-714

E-716

E-718

66

E-720

Utilities Expense used to account for the production related electrical and water consumption. Debited for utilities incurred Credited for adjustments, if any and when preparing closing entry Factory Supplies Expense used for accounting for production related supplies. Debited for factory supplies used Credited for adjustments, if any and when preparing closing entry Repair and Maintenance used for accounting the costs incurred to keep the asset operating at its present condition. Debited to Repair and Maintenance expense when it is only for ordinary repair for the damage. Debited to Assets and Accumulated Depreciation if it is for major repair and to increase the life of the machineries or equipment Credited when preparing closing entry Depreciation Expense Factory Equipment used for accounting the cost of equipment used in production allocated to current operations. Debited to depreciation expense Credited for adjustment, if any and when preparing closing entry Depreciation Expense Factory Furniture and Fixtures - used for accounting the cost of furniture and fixture used in production allocated to current operations. Debited to depreciation expense Credited for adjustment, if any and when preparing closing entry

E-722

E-724

E- 726

E- 728

SELLING AND ADMINISTRATIVE EXPENSE E-800 Salaries - used for accounting of sales and administration related salary. Debited for gross income of the employee Credited for any adjustments, if any and when preparing closing entry E-802 SSS Employer Share- Production used for accounting for sales and administration related SSS Expense. Debited for SSS premium share of employer Credited for adjustments, if any and when preparing closing entry PAG-IBIG Employer Share used for accounting sales and administration related employer share of the PAG-IBIG plan. Debited for the PAG-IBIG premium share of employer Credited for adjustments, if any and when preparing closing entry PhilHealth Employer Share used for accounting for sales and administration related employers share of the PhilHealth plan. Debited for Philhealth premium share of employer Credited for adjustments, if any and when preparing closing entry 13 Month pay- Direct Labor used for accounting for the 13 month pay of the employees in sales department. th Debited for the expense portion of the 13 month pay Credited for adjustments, if any and when preparing closing entry Income Tax Expense equivalent to 30 % for the first two years of operation .The annual filing deadline of the corporate income tax is April 15 for those whose fiscal year ends at December
th th

E-804

E-806

E-808

E-810

67

31 . At this point, all monthly estimated taxes are computed and any deficiency or refund will take place. Debited for 30% tax expense of the company Credited for tax credits and other adjustments E-812 Utilities Expense - used to account for the administrative portion of electrical and water consumption. Debited for utilities incurred Credited for adjustments, if any and when preparing closing entry Delivery expense- represent the cost of gasoline, oil and other related expenses in transporting goods. Debited to the amount that the buyer paid Credited to cash or accounts receivable Advertising Expense used to account for the promotional expense of the company. Debited for the expense portion of the advertising Credited for adjustments, if any and when preparing closing entry Communication Expense obligations to companys postage, telephone and telegraph received by the business. Debited for total amount of communication expense that the company incurred Credited when preparing closing entry Supplies Expense used to account for supplies used in the sales department. Debited for payments made to the supplier Credited for adjustments, if any and when preparing closing entry Security Expense used to account for contract salary of security. Debited for salary expense that the company incurred Credited to cash Pre-Operating Expenses (Taxes and Licenses) used to account cost incurred after company formation but before commencement of business. Debited when incurred Credited when preparing closing entry Depreciation Expense Office Equipment used for accounting the costs of equipment used in administration allocated to current operations. Debited to depreciation expense Credited for adjustments, if any and when preparing closing entry Depreciation Expense Office Furniture and Fixtures used for accounting the costs of furniture and fixtures used in administration allocated to current operations. Debited to depreciation expense Credited for adjustments, if any and when preparing closing entry Bad debt Expense - used for expensing doubtful and uncollectible account. Debited for provision of doubtful account Credited for excessive allowance for correction and when preparing closing entry

st

E- 814

E-816

E-818

E-820

E-822

E-824

E-826

E-828

E-830

68

TEMPORARY ACCOUNT E-900 Income and Expense Summary- used for clearing the accounts of the income and expenses portion usually done at the end or beginning of the year. Debited for closing expenses account; if there is a net income, this account is debited and retained earnings is credited Credited for closing income accounts; if there is a loss, this account is debited and retained earnings is credited

69

Revenue Cycle Accounting There should be periodic verification of the completeness, accuracy and validity of sales and accounts receivable balance per records. Cash Receipts All cash receipts should be documented upon receipt and deposited daily in the bank by the financial manager. All cash receipts should be correctly entered in the accounting records. Sales Return and Allowance Goods being returned are properly inspected. Returned are documented at the time of receipt. Purchasing/Disbursement Cycle All acquisition of goods and services should be authorized. The description, quantity and quality of goods should match with the specification of the order.

Accounts payable There should be periodic verifications of recorded purchases and liabilities. Adjustment to accounts payable should be supported by adequate document. Payroll Cycle Payroll Processing Amount dues to employees should be based on actual hours worked and should be accurately and properly reported, computed, summarized and recorded in the book. All services performed by the employees should be reported. Cash Sales Cycle From Cashier The cashier accepts the cash or check payment of a customer.

Cash / checks After receiving the cash or check, he will then issue a Sales Invoice and prepare a deposit slip and cash summary

Issue sales invoice to customer and prepare deposit slip and cash summary Sales Invoice 1 Sales Invoice 2 Cash Summary 1 Cash/ Checks Deposit Slip

The cash/ check and deposit slip will be given to the financial manager for her to deposit the money in the bank. The other cash summary will be filed.

To financial manager

File

To customer

70

Disbursement Cycle Production manager From Financial Manager

Purchase order

Supplier

Purchase order 3 Receiving report Invoice

Purchase order 1 Purchase order 2 Purchase order 3

Invoice

Review; and prepare update daily summary Inventory clerk File Prepare receiving report using invoice, purchase order, and number of goods counted as a basis to indicate relevant data regarding the goods received. Purchase order 3 Receiving report Invoice Voucher

voucher,

File Issue check

Purchase order 3 Receiving report Invoice Checks

Financial Manager

The production manager will prepare three copies of purchase order. One copy will be sent to the vendor. Another copy will be for filing purposes and the other one with quantity of goods indicated will be given to the Inventory clerk. The Inventory clerk will check the quantity of goods received by counting it and prepare receiving report after the count. Then, he gives the documents to Financial Manager.

When the Financial Manager received the Purchase order, Receiving report and Invoice, he will now review the documents and prepare voucher and update the daily record. He will now issue check to the supplier. The requisition, purchase order, invoice and voucher will be filed and kept by the Finance Manager.

71

Payroll Cycle

Managing Partner

Employees Financial Partner will get the record of pay rate, deductions, and personnel records from the Managing Partner and the timecards of the employees verified by the Managing Partner to compute the Employees salary.

Pay rate, deductions, personnel records, etc.

Time cards, verified by managing partner

Financial Partner The financial partner will compute for the employees salary and prepare the payroll summary and voucher and then issue checks to the employees.

Prepare payroll register, payroll summary, and voucher

Payroll register 1 Payroll summary 1 Voucher Issue checks and pay slip Financial manager

Checks Pay slip

Employees

72 Credit Sales

Managing Partner

From customer

Receive and accept customer orders

Receive the goods and signs the bill of lading.

Purchase order from customer

Bill of lading 2

Inventory clerk Customer Delivery man

Check availability of inventory

Bill of lading 3

Managing partner Managing partner

Check customer credit limit and prepare delivery documents.

Bill of lading 1 Bill of lading 2 Bill of lading 3

Inventory clerk

Delivery man

After the checking of the availability of the products, the Managing partner then prepares delivery documents. These delivery documents will be given to respective persons stated in the flowchart. Then, the delivery man delivers the goods diligently. After delivery, the customer signs the bill of lading. The signed bill of lading will be given to the managing partner as a proof that the goods were properly delivered.

Deliver goods diligently

Customer

73

Credit Collection

Customer

Remittance advice Customers check

The cashier will accept the remittance advice and the check which is properly endorse. The cashier will update the accounts receivable and collection summary. Remittance advice, the check and accounts receivable and collection summary will then be forwarded to the financial manager.

Cashier

Receive check and remittance advice, and update the receivable and collection summary. The cashier will issue Official receipt.

Remittance advice Customers check Accounts receivable and collection summary Official receipt 1 Official receipt 2

Official receipts will be given to customers issued by the cashier.

Financial manager Customer

74

INTERNAL CONTROLS Field/Area of Concern Cash Measure Checking Account Drawing Account Main Feature Liquidity. Numerous withdrawals. Unlimited deposits. Insured up to P500,000 (PDIC). Smaller chance for theft, embezzlement and fraud. Downside Account Fees Overdraft Fees Remedies Checking Accounts will be monitored on a regular basis by the Financial Manager.

Cash Receipts and Petty Cash

Control 1 Signature. Office Safe Box.

Dual

Connivance.

In case of Connivance, Financial statements are checked on a regular basis headed by the financial manager, the signature alone will be enough evidence for the committed crime. Documents will be enrolled to insurance programs whenever necessary. Needed documents will be noted ahead to be readily available when needed. In case of Connivance, Financial statements are checked on a regular basis headed by the financial manager, the signature alone will be enough evidence for the committed crime. Bank fees are irrelevant (low cost) when it comes to these kinds of situations.

Marketable Securities and other Important Documents

Safe/Safety Deposit Box

Convenience and privacy, Safety and security. Offers peace of mind at low cost. A lot safer that a Home Safe.

Only available during banking hours. Box contents are not insured.

Security

Control 1. Dual Signature.

Smaller chance for theft, embezzlement and fraud.

Connivance.

Records

Record Keeping Back Up (Bank)

In case of major disaster that both electronic and manual records of the company are destroyed; there is possibility of recreating the records using bank statements and copies of the checks.

Bank Fees.

75

Bank Assets

Control 2 -Reconcilement and Verification System. Sales Analysis

Detect discrepancies. Transactions are verified. Demand and Distribution are analyzed. Basis of recommendations to increase and decrease production. Provides overview of ordering activity of the company. Detect any discrepancies at an early stage. Day to day activities are being recorded. One copy goes to a third party (Accounting Copy), the other two goes to the two parties involve. Easier to check customer accounts. Discrepancies are adjusted promptly. Easier to check payables. Surcharges and penalties are avoided. serves as a primary record keeping material. Done by the Production Partner, gives an overview of all the employees hours work. Accuracy for Deductions and Taxes

--

--

Productivity and Sales

--

--

Sales Report Summary

Time consuming.

Time is irrelevant with check and balance.

Transactions

Journals. Book Keeping. Triple Copy-Generation

---

---

Accounts Receivable

Subsidiary Ledgers

--

--

Accounts Payable (Supplier and Utilities) Payroll

Subsidiary Ledgers

--

--

Bundy Clock and Time Card Summary of Employee Time Record

--

--

Withholding Deduction Code

Tax

--

--

76

Electronic Computation

Payroll

Convenient and Fast. Smaller chance miscalculations.

-for

--

Subsidiary Ledgers for Government Remittances (BIR, SSS, PAGIBIG, PhilHealth) Production and Warehouse Inventory Volume- In Calculation

Avoids penalties to the company for late remittances. Answers the ff. questions: Did the company receive the correct volume of raw materials? Is there excessive waste in the process? Did the workers made the correct mixture? Was the raw material of low quality? Was there pilferage? Is there an error in the accounting or count? Gives a volume count of inventories in the warehouse on an everyday basis. The surprise count is an additional safeguard against theft, pilferage and mismanagement. The cleanliness and orderliness of the warehouse can also be inspected anytime.

--

--

--

--

Warehouse Inventory Log (Work in Process) Scheduled and Unscheduled Inventory

--

--

--

--

77

Source documents:

1.

Official Receipt

MONTAVUERDE Naguilian Rd., Baguio City Tel. No. TIN No. __________ Date __________ OFFICIAL RECEIPT Received from ___________________________________________________ the sum of _________________________________________( P )__ as full/partial payment of ________________________________________________ Issued by: __________________ Signature __________________

Number of copies: Duplicate Dimension: One- third (4x8 inches)

78

2.

Purchase order

MONTAVUERDE Naguilian Rd., Baguio City Tel. No. TIN

Purchase Order From____________________ Address__________________ ________________________ Description To ___________________ Address ______________ ______________________ Qty Price Date _________________ Terms ________________ Ship Via _______________ Total

Prepared by: _____________________ No. _____________________________

Number of copies: Triplicate Dimension: One- half (4x8 inches)

79

3.

Sales Invoice

MONTAVUERDE Naguilian Rd., Baguio City TIN SALES INVOICE

Sold to: ________________________________ Address :_______________________________ Qty Description

No. _____________________ Date: ____________________ U- Cost Total

Approved by: _______________________

Received items in good condition: _______________________ Customers Signature

Number of copies: Duplicate Dimension: One- fourth (4x6 inches)

80

4.

Time cards and pay slip

Employee No. __ MONTHLY TIME CARD Name _______________________ Position _____________________ Month Ending ________________ Day and Date AM In Out In PM Out Overtime In Out Hours

MONTAVUERDE Employee Payroll Slip Employee ID Employee Name TIN SSS No.

This Period Gross Pay Less Withholding Tax Less SSS Less PAG-IBIG Less PhilHealth Less Employee Loan Less Other Deduction Net Pay

YTD Total P

Number of copies: Duplicate Dimension: One- fourth (4x6 inches)

81

5.

Petty Cash Summary

MONTAVUERDE PETTY CASH SUMMARY

Expenditures per Classification Date Particulars PCV No. Total Transportation Supplies Repairs Fuel Communication Miscellaneous

82

6.

Bill of Lading

MONTAVUERDE Naguilian Rd., Baguio City TEL #

BILL OF LADING Delivered to: _____________________ Address: ________________________ No. ______________ Date: ____________

Qty

Description

Price

Total

Received the merchandise in good order and condition Received by: _________________________________

Number of copies: Triplicate Dimension: One- half (6x8 inches)

83

7.

Accounts receivable and collection summary

MONTAVUERDE ACCOUNTS RECEIVABLE AND COLLECTION

Client Name

Reference No.

-Collections

+Sales on Terms

New Balance

84

8.

Cash Voucher

MONTAVUERDE Irisan, Baguio City Tel. No.

CASH VOUCHER Pay to _______________________________________ Address ______________________________________ Particulars No. _________ Date _________ Amount

Code

Account

Debit

Credit

Approved for payment ______________________ Financial Manager/Owner ______________________ Payee

Number of copies: One copy Dimension: One- half (6x8 inches)

85

9.

Check Voucher:

MONTAVUERDE Irisan, Baguio City Tel. No.

CHECK VOUCHER Pay to ________________________________________ Address _______________________________________ Bank Name & Check No._________________________ No. ______________ Date ____________ Check Date_______

Particulars

Amount

Code

Account

Debit

Credit

Prepared By:______________________________ Approved By:_____________________________

Number of copies: One copy Dimension: One-half (6x8 inches)

APPENDICES

86 List of Baguio Contractors General Engineering (Source: DTI-Baguio) Company A. I. P. Construction A. D. Marrero General Construction A.P.B. Construction Agpes Construction Services Benguet Builders BHM Construction Bondsbuilt Enterprises Capable Builders Diate Construction and Allied Services E.M. Muncal Construction E.T. Latawan Construction Emong Builders Construction G.A. Flores Construction, Inc. Gaponglis Construction Gold Finger Builders Hammerhead Construction & Enterprise Hanging Stone Construction J.M Saupan Construction Jaben General Contracting & Engg Services Jessie Construction Services JL Construction Kabulon Construction Kane Construction, Inc. Kirs General Construction Likayan Construction Marcons Builder Melecio Construction Moment Diagram Builders Primary class. General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering Authorized Managing officer Arnel Isilen Peil Antonio Dimacale Marrero Armando P. Baldonado, Sr. Noel Dapingan Agpes Isabelo O. Abing Bond Holden Mangaoang Bonifacio Ondong Delos Santos Ariel Imperial Nepomuceno Fortunato Bardinas Diate Elpidio Mariano Muncal Felicitas Balan-eg Latawan Elmer Q. Balong-Angey Gamaliel A. Flores Abuan B. Gapongli Roland N. Garcia Julius Calabias Guzman Frank Andres Wadasen Bangao Julio M. Saupan James Awisan Benos Jessie As-il Palangdan Jose Virgilio Molina Lusterio Joseph Balbos Eming Kane K. Chanbonpin Alfredo Enriquez Romero Mathew Kiweden Palangeo Marciano L. Garcia Melecio Matinek Moyamoy Robert Baliang Daclili

87 Mountain Horizon Builder OHara Construction & Aggregates R.A.J. CE Construction RIS Construction Rosber Enterprises Segal Construction SF Surveying & General Construction Spectrum Co0nstruction and Devt. Corp. Tango Romeo General Construction Thunderblast Ventures Tryst Builders Enterprises General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering General Engineering Vladimere Calde Lawilao Hilary Polig Awkit Rowald A. Julian Jimmy Sagalen Santiago Neil B. Berto Sergio S. Galpo Criselda Sebio Felix Arnulfo S. Pilando Theresa A. Reyes Armando Buaging Aluyen Nestor Maranion Pablo

Computation of Demand of Baguio Contractors Statistical Straight Line Method YEAR 2009 2010 2011 Total Y 598,200 483,500 590,000 1,671,700 X 1 2 3 6 X
2

XY 598,200 967,000 1,770,000 3335200

a 565,433.33 565,433.33 565,433.33

b -4,100 -4,100 -4,100

(x) 1 2 3

Yc 561,333.3 557,233.3 553,133.3

Y-Yc 36,867 -73,733 36,867

(Y-Yc)

1 4 9 14

47,155,689.00 188,595,289.00 47,155,689.00 282,906,667.00 9,710.93

Standard Deviation Arithmethic Straight Line YEAR Y 2009 58,200 2010 43,500 2011 70,000 Total 171,700 Standard Deviation a 40,900 40,900 40,900 Yi-1 58,200 99,100 Yc 99,100 140,000 Y-Yc 55,600 70,000 (Y-Yc)
2

3,091,360,000 4,900,000,000 7,991,360,000 51611.88494

Arithmeric Geometric Method YEAR Y % Increase/ Decrease -0.25 0.61 0.36 Yi+1 43,500.00 70,000.00 (1+r) 1.18 1.18 1.18 Yc 36,917.31 59,407.17 0.00 Y-Yc 21,282.69 -15,907.17 0.00 (Y-Yc)
2

2009 58,200 2010 43,500 2011 70,000 Total 171,700 Standard Deviation

452,952,899.25 253,037,908.04 0.00 705,990,807.29 15,340.48

88
Statistic Parabolic Method 2 XY a b 523,800 40,925 -27,110.5 43,500 40,925 9,036.842 630,000 40,925 27,110.53 1,197,300 40,925 9,036.84

YEAR Y X 2009 58,200 -3 2010 43,500 1 2011 70,000 3 Total 171,700 1 Standard Deviation

X 9 1 9 19

X 81 1 81 163

XY -174,600 43,500 210,000 78,900

c 23,175 2,575 23,175

Yc 36,989.47 52,536.84 91,210.53

Y-Yc 21,210.53 (9,036.84) (21,210.53)

(Y-Yc) 449,886,426.59 81,664,515.24 449,886,426.59 981,437,368.42 18,087.17

STANDARD DEVIATION Arithmetic Straight Line Arithmetic Geometric Statistical straight Line Statistical Parabolic

51,611.88 15,340.48 9,710.93 18,087.17

Computation of Quarterly Demand of Baguio Dealers of Stone Pavers Statistical Straight Line QTR 1st 2nd 3rd 4th Y 150,325.00 168,395.00 166,522.00 159,947.00 X 1 2 3 4 10 X
2

XY 150,325.00 336,790.00 499,566.00 639,788.00 1,626,469.00

a 154,549.00 154,549.00 154,549.00 154,549.00

b 2,699.30 2,699.30 2,699.30 2,699.30

(x) 1.00 2.00 3.00 4.00

Yc 157,248.30 159,947.60 162,646.90 165,346.20

Y-Yc -6,923.30 8,447.40 3,875.10 -5,399.20

(Y-Yc)

1 4 9 16 30

47,932,082.89 71,358,566.76 15,016,400.01 29,151,360.64 163,458,410.30 2,699.60

TOTAL 645,189.00 Standard Deviation

ARITHMETIC STRAIGHT LINE METHOD QUARTER 1st 2nd 3rd 4th Y 971,658.00 0.00 154,549.00 463,647.00 -169,337.00 -169,337.00 -169,337.00 11,725.00 -157,612.00 -326,949.00 -157,612.00 -326,949.00 -496,286.00 157,612.00 481,498.00 959,933.00 24,841,542,544.00 231,840,324,004.00 921,471,364,489.00 1,178,153,231,037.00 3,976.94 Arithmetic Geometric Method QUARTER 1st 2nd 3rd 4th TOTAL Y 150,325.00 168,395.00 166,522.00 159,947.00 645,189.00 0.12 -0.01 -0.04 0.07 % Increase/Decrease Yi+1 168,395.00 166,522.00 159,947.00 (1+r) 1.02 1.02 1.02 1.02 339,095,507.57 9,207.27 Yc 164,576.86 162,746.32 156,320.40 Y-Yc -14,251.86 5,648.68 10,201.60 (Y-Yc)
2

Yi-1

Yc

Y-Yc

(Y-Yc)

TOTAL 1,589,854.00 Standard deviation

203,115,397.20 31,907,542.45 104,072,567.92

Standard Deviation

89
Statistical Parabolic QTR 1st 2nd 3rd 4th Y 11,725 22,395 16,582 19,947 X -3 -1 1 3 X
2

XY -35,175 -22,395 16,582 59,841 18,853

XY 105,525 22,395 16,582 179,523 324,025

a 19,945.06 19,945.06 19,945.06 19,945.06

b 942.65 942.65 942.65 942.65

c -456.56 -456.56 -456.56 -456.56

Yc 13,008.05 18,545.85 20,431.15 18,663.95

Y-Yc -1,283.05 3,849.15 -3,849.15 1,283.05

(Y-Yc)2 1,646,217.30 14,815,955.72 14,815,955.72 1,646,217.30 32,924,346.05 2,868.99

9 1 1 9 20

81 1 1 81 164

TOTAL 70,649 0 Standard Deviation

STANDARD DEVIATION Arithmetic Straight Line Arithmetic Geometric Curve Statistical straight Line Statistical Parabolic 3,976.94 9,207.27 2,699.60 2,868.99

Articles of Partnership Of MONTAVUERDE

KNOW ALL MEN BY THESE PRESENTS: That, we the undersigned, all of legal age and residents of the Republic of the Philippines have agreed to amend a general partnership under the terms and conditions herein set forth and subject to the provisions of existing laws of the Republic of the Philippines. AND WE HEREBY CERTIFY: ARTICLE I. That the name of the partnership shall be MONTAVUERDE. ARTICLE II. That the principal office of the Partnership shall be located at Naguilian Rd., Baguio City, Philippines. ARTICLE III. That the names, citizenship, residence and designation of the partners of said partnership are as follows: Name Gieanny Loise C. Peralta Michelle Ann M. Monsales April Joy C. Guiawan Kristel Mae V. Unciano Kathleen Marie V. Novida Citizen Filipino Filipino Filipino Filipino Filipino Residence Baguio City Baguio City Baguio City Baguio City Baguio City Designation Managing Partner (Capitalist-Industrial) Financial Partner (Capitalist-Industrial) Production Partner (Capitalist-Industrial) Capitalist Partner Capitalist Partner

ARTICLE IV. That the term for which said partnership is to exist is 30 years from the original recording of said partnership by the Securities and Exchange Commission. ARTICLE V. That the purpose for which said partnership is formed are as follows: 1. To manufacture stone pavers. 2. To help in saving the environment by using recycled plastic as a raw material. ARTICLE VI. That the capital of the partnership shall be two million five hundred thousand, Philippine Currency contributed in cash by the partners as follows:

90

Name Gieanny Loise C. Peralta Michelle Ann M. Monsales April Joy C. Guiawan Kristel Mae V. Unciano Kathleen Marie V. Novida

Amount Contributed P 2,500,000.00 P 2,500,000.00 P 2,500,000.00 P 2,500,000.00 P 2,500,000.00

That no transfer will reduce the ownership of Filipinos citizens to less than the required percentage of capital shall be recorded in the paper books of the partnership. ARTICLE VII. That the profits and losses shall be divided pro-rata among the partners. ARTICLE XII. That the remaining general partner or partners shall have the right to continue the business in cases of death, retirement, civil interdiction, insanity or insolvency of a general partner. ARTICLE XIII. That the firm shall be under the management of Gieanny Loise C. Peralta, as General Manager and as such she shall be in charge of the management of the affairs of the partnership. ARTICLE XIV. That the partners willingly undertake to change the name of the partnership immediately upon receipt of notice/ directive from the Securities and Exchange Commission that another partnership, corporation, or person has been declare misleading, deceptive, confusingly similar to a registered name or contrary to public morals, good customs or public policy. IN WITNESS WHEREOF, we have hereunto set our hands this 30 day of January 2012 at Baguio City, Philippines.
th

GIEANNY LOISE C. PERALTA TIN:

MICHELLE ANN M. MONSALES TIN:

APRIL JOY C. GUIAWAN TIN:

KRISTEL MAE V. UNCIANO TIN:

KATHLEEN MARIE V. NOVIDA TIN:

91 ACKNOWLEDGEMENT

Republic of the Philippines } City of Baguio } S. S.

BEFORE ME, a Notary Public, for and in Baguio City, Philippines, this 30 day of January 2012, personally came and personally appeared the following persons with their Community Tax Certificates as follows: Name Gieanny Loise C. Peralta Michelle Ann M. Monsales April Joy C. Guiawan Kristel Mae V. Unciano Kathleen Marie V. Novida CTC # Place issued Baguio City Baguio City Baguio City Baguio City Baguio City

th

Known to me to be the same persons who executed the FOREGOING ARTICLES OF PARTNERSHIP, and they acknowledged to me that the same is their voluntary act and deed.

WITNESS MY HAND AND SEAL on the date first above written.

Atty. Alexis R. Agmata Notary Public Valid Until December 31, 2012 PTR. No. IBP No. Roll of Attorney No. TIN Baguio City Doc. No.: Page No.: Book No.: Series of 2012

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CURRICULUM VITAE

Name: April Joy C. Guiawan Age: 20 years old Date of Birth: April 12, 1991 Home Address: 4 NPC compound, Ramon, Isabela Course: Bachelor of Science in Accountancy Email address: aj_guiawan@yahoo.com High school attended: School: La Salette of Raman Address: Raman, Isabela Year Graduated: 2007 Organizations: Member, Junior Philippine Institute of Accountants, Saint Louis University, 2009-2012 Member, Junior Financial Executives, Saint Louis University, 2011-2012 Member, Green Core Society, Saint Louis University, 2011-2012

Name: Michelle Ann M. Monsales Age: 21 years old Date of Birth: November 7, 1990 Home Address: AR 007-A Lower Riverside, Ambiong, La Trinidad, Benguet Course: Bachelor of Science in Accountancy Email address: mitchiemonzz_05@yahoo.com High school attended: School: La Immaculada Concepcion School Address: E. Caruncho Ave., Malinao, Pasig City Year Graduated: 2007 Organizations: Member, Junior Philippine Institute of Accountants, Saint Louis University, 2009-2011 Member, Junior Financial Executives, Saint Louis University, 2011-2012 Member, Green Core Society, Saint Louis University, 2011-2012 Member, Society of Integrated Commercians for Academic Progress, Saint Louis University, 2009 2010

Name: Kathleen Marie V. Novida Age: 21 years old Date of Birth: September 6, 1991 Home Address: Florida St., San Isidro, Candon City Course: Bachelor of Science in Management Accounting Email address: kathleen_marie06@yahoo.com High school attended: School: Candon National High School Address: Bagani Campo, Candon City Year Graduated: 2008 Organizations: Finance Secretary, Society of Integrated Commercians for Academic Progress, SLU, 2011-2012 Member, Junior Philippine Institute of Accountants, Saint Louis University, 2009-2012 Member, Green Core Society, Saint Louis University, 2010-2012

93 Name: Gieanny Loise C. Peralta Age: 19 years old Date of Birth: August 2, 1992 Home Address: #190 Tuding, Itogon, Benguet Course: Bachelor of Science in Accountancy Email address: gieannyloiseperalta@rocketmail.com High school attended: School: Saint Louis School of Pacdal Address: Pacdal, Tuba, Benguet Year Graduated: 2008 Organizations: Senior Member, Tanghalang SLU, Saint Louis University, 2011-2012 Associate, Society of Integrated Commercians for Academic Progress, SLU, 2011-2012 Member, Junior Philippine Institute of Accountants, Saint Louis University, 2009-2012 Member, Green Core Society, Saint Louis University, 2010-2012 Name: Kristel Mae V. Unciano Age: 20 years old Date of Birth: October 16, 1991 Home Address: 26 Luna Street, San Ramon, Magsingal, Ilocos Sur Course: Bachelor of Science in Accountancy Email address: kristelmaeu@yahoo.com High school attended: School: Magsingal National High School Address: San Clemente, Magsingal, Ilocos Sur Year Graduated: 2008 Organizations: Administrative Secretary, Society of Integrated Commercians for Academic Progress, SLU, 2011-2012 Junior Associate, Society of Integrated Commercians for Academic Progress, SLU, 2009-2011 Member, Junior Philippine Institute of Accountants, Saint Louis University, 2008-2012 Member, Green Core Society, Saint Louis University, 2010-2012

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