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Chapter 1


Background of the Study

Businesses oftentimes fail to realize the importance of equally effective and efficient cost
system, resulting to inappropriate scraps, underused materials and in the long run, nonmaximization of profit. A cost system is therefore vital in a business operation.
Cost accounting examines the cost structure of a business. It does so by collecting
information about the costs incurred by a company's activities, assigning selected costs to
products and services and other cost objects, and evaluating the efficiency of cost usage. This
branch of accounting is mostly concerned with developing an understanding of where a company
earns and loses money, and providing input into decisions to generate profits in the future.
This cost accounting system study is conducted to assess the cost system of existing
establishments in Negros Occidental. The researchers aim to apply their learning in the subject to
help evaluate the current cost system of a business, if it exists, or create one that is uniform with
the operation of the chosen business.
Flower Pauer, a flower shop that offers a variety of botanical art designs that goes beyond
conventional arrangement was selected by the researchers to conduct the study. This flower shop
along 22nd street, Lacson offers baskets, bouquets, bud boxes, bud buckets and also open for
customizations at the customers request. They cater to different occasions like anniversaries,
weddings, burials and other special events.

The researchers of this study seek to assist Flower Pauer in creating a cost system that
conforms to its operation of providing world class botanical art designs and help achieve in
making every special life event of Bacolodnons bloom.

The following objectives are expected to be met in the course of this study:
1) To understand the production process of Flower Pauer in creating botanical art designs.
2) To create an effective and efficient cost accounting system uniform with the nature of Flower
Pauers production process and assist in:
(a) ascertainment of cost
(b) determination of price
(c) cost control and cost reduction
(d) management decision-making

Background of the Business

Name of the Business: Flower Pauer
Business Type: Sole Proprietorship
Proprietor: Pauline I. Lopez
Nature of Business: Service, Manufacturing
Year of Establishment: August 2011 (4 years)
Location: Lacson 22nd Street, 6100 Bacolod City, Philippines
Contact Details: 709-8119
Background of the Proprietor
Name: Pauline I. Lopez
Nationality: Filipino
Age: XX
Educational Attainment: College Graduate (Riverside College)
History of Flower Arrangements
The art of flower arranging has a surprisingly long history. The earliest known flower
arranging dates back to ancient Egypt at 2500 BCE where the Egyptians were already decorating
flowers in vases and were used in different occasions like spiritual processions, burials and even

simply on table decorations. Flowers were delicately selected according to symbolic meaning,
usually putting emphasis on religious significance which could evidently be seen on the
illustrations of arranged flowers found on Egyptian carved stone reliefs and painted wall
While flower arrangements are not objects used on everyones day-to-day schedule, their history
indicates that these objects of attraction have had significant impacts to humanity. While most
arrangements have been used simply as embellishment, some propose that arrangements in the
Gregorian Era had the practical purpose of giving sweet fragrance to a largely unwashed
populace, as during that era, bathing was seen as a way for disease to spread. Flower
arrangements have also served to help in physical and mental health. For example, a funerary
flower arranging catalog from 1901 suggests that arrangements help to lighten grief in times of
tragedy thanks to their beauty and fragrance. In fact, florists arrange different types and colors of
flowers using patterns of repetition and alternation in order to create what they call a language
of flowers. The language of flowers, sometimes called floriography, means that through the use
or arrangement of flowers, a number of messages including those of condolences, dislike,
friendship, or love, can be depicted. Meanings, of course, change depending on cultures and eras.
An example would be the worldwide buzz of the Royal Wedding of 2011, where even the
meaning behind the flowers in Kate Middletons bouquet was discussed due to her inclusion of
the English Royal tradition by including a sprig of myrtle, representing luck and love in
marriage, in her bouquet.
The flower industry has greatly improved and evolved from what it was then. From simple
flower vase ornaments placed for spiritual beliefs, it has reached greater recognition and has
become an art. It is often displayed on art exhibits and gathered widespread attention from the

public. It has become a business. According to aboutflowers.com, the flower industry in the
United States earned $26.6 billion in 2014 only and with estimated average annual florist sales in
2012 of $322,331. According also from the same source, Colombia tops as the biggest import
country in 2012 with 78%, followed by Ecuador with 15% and the remaining 7% from other

Ornamental Horticulture Industry in the Philippines

The Philippine Ornamental Horticulture Industry has come a long way since the 70's
when cut flowers were considered its major component and the growers were hobbyists or plant
enthusiasts. The phenomenal growth of the Ornamental Horticulture Industry in the last few
years has led the Department of Agriculture to include the cut flower in its Key Commercial
Crop Development Program (KCCDP) for 1996 - 2000. The Department of Trade and Industry
adopted the ornamental crops as its "Export Winner" and the Department of Science &
Technology recognized it in its Science & Technology for National Development (STAND
2000). Young as it is, the industry has shown its vital role in the local economy, and slowly it is
penetrating the export market and emerging as a true global competitor.
In the last few years, an increased awareness and recognition of high return on
investments, rapid population growth, higher standard of living, more hotels and restaurants,
influx of tourists has led to more demanding and choosy clients. An increased demand triggered
more production but despite the larger area devoted to cut flower, there is still a short fall in the
supply. The demand for the domestic market is so big that the country has no option but to
import some cut flowers, mainly chrysanthemum and orchids from other countries. This is

strongly evident during Valentine's Day (Feb. 14), All Saint's Day (Nov. 1), School Graduation
(March and April), May Flower Festivals and Yuletide Seasons (December).

History of the Business

FLOWER PauER has a very unusual story behind its start as a business. It was born a
few days after the death of the owners father. Pauline Lopez grew up as a Daddys Girl, and it
was particularly devastating for her to see her father go through such illness and eventually
death. Her father had plans for her though and left her a house at Rosario Heights, which
everyone only knew of after his death. The house was surrounded with different fruit trees and
had a beautiful garden which her dad personally attended to when he was still alive. This was not
only the start of her interest in cultivating flowers, it was also the start of FLOWER PauER.
Pauline found the perfect spot for her shop somewhere near Lopues East and was
dedicated to opening up her business. Through her dedication, FLOWER PauER officially
opened last August 16, 2011. Since then, Pauline has been busy with different projects.
Among her first projects were the bouquets she delivered to the opening of Sony
Philippines. She designed the bouquets herself with what can only be referred to as raging
creativity. FLOWER PauER also had some exhibits at Robinsons Place Bacolod with Amaia
and Ayala Bacolod, among others. Soon, various customers were offering her different projects
from simple birthday bouquets to wedding favors. Currently, she also has a wide lot for the
cultivation of the cut flowers and other plants that are used in the business in a nearby
municipality called Don Salvador Benedicto.
Products and Services

FLOWER PauER would like to say that the product they offer is botanical art design that
goes beyond conventional flower arrangement since it is a daring fusion of innovative flower
arrangement and the multi-media art. With this, FLOWER PauER has 4 major products from
which it derives revenue from:

Bud Boxes
Bud Buckets
Each of these already have numerous designs that a customer may choose from. The
business is also open for customizations at the customer's request.

Exhibit 1.1 Flower Pauer Business Location