FEASIBILITY STUDY

A Feasibility Study
Presented to the Faculty of College of
Accountancy, Business, Economics and
International Hospitality Management
Batangas State University
Batangas City

In Partial Fulfillment
of the requirements for the degree of
Bachelor of Science in Accountancy

By:
Camagon, Marya Abigaile R.
Ilao, Mae Angela
Magnaye, Rona
Mortel Aljhon L.
Orlina, Abegail M.

May 2019

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Barakoffee

By:
Camagon, Marya Abigaile R.
Ilao, Mae Angela
Magnaye, Rona
Mortel Aljhon M.
Orlina, Abegail M.

BSA-4203

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Project Feasibility Study

Project Profile:

Company Name:

Key Contact:

Position: Year Established: 2019

Telephone Number: Mobile Number:

Email Address: Website:

Number of Employees:

Product:

I. Rationale Coffee has proved to be an essential commodity around the world

for hundreds of years. It is now seen as a craft, a product of

artistry, and a source of pride for its origin. Nowadays, people

drink coffee not just to get a dose of stimulating caffeine but for

experience and appreciation.

It has a history as rich as its flavor. The first coffee tree was

introduced in Lipa, Batangas in 1740 by a Spanish Franciscan

monk. From there, coffee growing spread to other parts of

Batangas like Ibaan, Lemery, San Jose, Taal, and Tanauan.

Batangas owed much of its wealth to the coffee plantations in

these areas and Lipa eventually became the coffee capital of the

Philippines (Philippine Coffee Board).

For Filipinos, barako coffee is a symbol of their country. The

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 term “Barako” is used to refer to the masculine qualities of a

male; it is used to emphasize the strong signature taste of the

coffee.

Moreover, a lot of people cannot start a normal day without

drinking first their coffee. Filipinos usually have bread dipped in

hot coffee before eating it and drinking the coffee

afterwards.Traditionally, this manner of eating was passed on

from many generations of families and turned out to be a part of

culture by how Filipinos, way back since the Spanish times until

now consumes their bread and coffee every morning. With this

way of eating for many years, dipping bread in coffee became

one of the identity trademarks of Filipinos when it comes to food

consumption and also earned its spot to be a part of the culture

and tradition as it was being adopted along the Philippines’ rich

history up to the present day.

Instead of dipping the bread in the coffee, the proponents will

introduce the barako coffee jamthat would be deemed profitable

for it is new and affordable to the customer.

II.Objectives 1. To determine the market feasibility of the product by

distinguishing the target market and determining the historical

demand and supply of related products.

2. To determine the technical feasibility of the product through

determining the production capacity and necessary facilities,

equipment, labor, materials and other requirements to

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 manufacture the product.

3. To determine the management feasibility by determining the

appropriate form of business with corresponding policies and

legal requirements.

4. To determine the financial feasibility by ascertaining the

capitalization for the projected production and operations.

5. To fully commercialized the said product.

III. Project The business, organized as general partnership, will

Description manufacture Barako jam. The proponent decided to form a

partnership under the business name, “Barakoffee Jam,” that

will serve and provide a new and distinct variant of jam in

Batangas City. A strong aroma taste and yet nutritional jam

with variety of coffee flavors from which the customers may

choose from according to whichever will satisfy their taste

buds. The product is primarily made of KapengBarako and

Milk. This is a household product in which the finished

product will be distributed to the different retail store in

Batangas City. The project also involved the appropriate

organizational structures and government policies. Financial

analysis of the business includes the project of the initial

capital of requirements as well as the ratios and the financial

statements were also discussed to determine whether the

business will be profitable and will be able to stand its

operations for the first five years of operations. This also

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 include the contribution of the business to the company.
IV. Current Market TREND

Trends and Spreads have continuously grew in market value and in volume

Opportunities terms based on the market research of Canadian from year 2007

to 2017. The sweet and savoury spreads market is increasing

owing to the increasing demand for sweet and savoury spreads

that match the quick-paced lives of current consumers. Sweet and

savoury spread includes Jams, Honey, Chocolate spreads and

other products. Some drivers are growing health awareness,

increasing demand for convenience food and perceiving spreads

as an indispensable ingredient used in food stuff. Honey,

however, recorded faster value and volume growth, since it is

commonly used as a healthier alternative to sugar. Since a

growing number of consumers actively made healthier food

choices to avoid lifestyle diseases, honey benefited, leading to its

improved performance. In the Philippines, spread grew 4% in

current value and 2% in volume terms in 2017.

COMPETITIVE ADVANTAGE

There are numbers of competitor the entity would face in the

spread industry like cheese, butter, margarine, mayonnaise and

processed meat and seafood such as shelf stable tuna, corned beef

and hot dogs, which are also used as fillings for baked goods.

Due to their differences in terms of tastes, customer can choose

their preferred spread. However, the price is one of the

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 company’s competitive edge since it only costs Ρ15.00 per every

bottle compared to the other spreads. Thus, Unilever Foods

Philippines (CMC) remained the leading player in spreads in

2017 accounting for 23% of total value sales. It derived sales

share from nut and seed based spreads where its brand, Lady’s

Choice, ranked first with a value share of 42% in 2017. 

PROSPECTS

Spreads is expected to continue facing competition from

substitutes such as mayonnaise, cheese, butter and margarine over

the forecast period. The selling of barakoffee jam is introduced

by the proponents targeting those people who loves to drink

coffee at the same time eating with their breads, this spread is

already a has a taste of coffee so they don’t have to drink a coffee

anymore. Also, this barako coffee jam is very convenient to those

busy people who has no time to mix a coffee in their rush hours.

Including also, to every individual who wants an affordable and

cheap price spread but has a quality taste.

Technical Aspect of the Project

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Figure 1. Manufacturing Process

(pictures)

Figure 2. Production Process

Production Schedule

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 The business will start its daily operations at 8:00 o’clock in the morning and ends at

5 o’clock in the afternoon. The workers will be given fifteen minutes of breaktime in the

morning and one hour lunch. This will give the workers enough time to relax in the middle of

their whole day work. The workers will be working eight (8) hours a day, six (6) days a

week, and twenty-four (24) days a month with a total of two hundred eighty-eight (288) days

a year.

Barakoffee Inc. will start its operation at exactly 8:00 in the morning and end at 5:00

in the afternoon. This already includes the break time schedule of each worker.

Table 1
Production Schedule
(220 g per jar)
Year Daily Weekly Monthly Annually
2020 65 390 1,560 18,720
2021 78 468 1,872 22,464
2022 94 562 2,246 26,957

Production is scheduled for 6 operating days a week, or an average of 24 operating

days a month. In the first year of operation, the enterprise will have a daily production

capacity of 65 pieces of Barako Jam, a weekly production volume of 390 pieces, a monthly

production capacity of 1,560 pieces, and annual production volume of 18,720 pieces. The

production is expected to increase by 20% every year due to the worker’s gradual acquisition

of expertise in creating the product, and they have learned how to shorten the allotted

production time.

Direct Material Cost

Raw materials are considered as essential ingredients in the production of the finished

goods. These are all the materials that form an integral part of the finished product and are

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included explicitly in calculating the cost of the product. These materials will be purchased

from the suppliers.

Table 2
Direct Materials

Direct Material Quantity Unit Cost Total Cost

Kapeng Barako 1152kg Php 150.00 Php172,800.00
Condense milk 4608 pcs (1kl) 70.00 322,560.00
Evaporated milk 4608 (380g) 26.00 119,808.00
Salt 50kg 10.00 500.00
Total Php 354.00 Php 615,668.00
Sources: Old Market, Batangas City

Table 2 shows the cost of direct materials for the year 2020 to 2022. For the year of

2020, the annual cost that will be incurred in purchasing/utilizing direct materials is PhP

615,668.00 and would increase by 10% in 2021 which resulted to amount of PhP 677,234.80.

By 2022, the direct material cost would increase by 14% which is amounted to 772,047.67.

The direct material cost per unit of product is Php 3.10 for the year of 2018, PhP

3.41 in the year 2019 and PhP 3.90 in the year 2020.

It shows the unit price for each direct raw material to be used for one year operation.

Kapeng Barako. It is the main ingredients of the product.

Condensed Mlik. It is used to make the product taste good.

Evaporated Milk. It is used to add a smooth and creamy flavor.

Salt. It is used as a seasoning of the product.

Compensation for Direct Labor

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 The hereunder table shows the breakdown of compensation for workers who are

directly involved in producing or manufacturing the product.

Table 3
Compensation for Direct labor

Workers Compensation Monthly Annually

Worker 1 Php 335.00 Php 8,040.00 Php 96,480.00
Worker 2 335.00 8,040.00 96,480.00
Total Php 670.00 Php 16, 080.00 Php 192, 960.00

It can be garnered on the table above the compensation for the direct labors of the

manufacturing company for the year 2020 and 2021 amounted to PhP 192,960.00. For the

year 2022, the compensation for the direct labors of the manufacturing company amounted to

PhP 289,440.00.

Table 4. Manufacturing Overhead

Indirect Materials

Indirect Materials are items needed for the completion of the product but the

consumption of which regards to the product is either so small or allocation would be too

complex so that for convenience, it is treated as indirect product cost. Indirect materials are

any item that is incorporated into the goods but used in production.

Table 4.1
Indirect Materials

Indirect Material Quantity Unit Cost Annual Cost

Clear Glass Jar 17,300 jar Php 10.00 Php 173,000.00

Label/Print 5,760 pcs 5.00 28,800.00
Shrink Bands 17,300 pcs .50 8,650

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 Total Php 15.50 Php 210,450.00
Sources: Old Market, Batangas City

It can be observed from the table above the annual expenses/cost that will be incurred

in purchasing and using indirect materials for the product that will be produced in the year

2020 amounted to Php 315,000.00and in the year 2021 the annual cost amounted to PhP

320,250.00 213. For the year 2022, the annual cost is Php 328,500.00.

Compensation for indirect labor

Annual
Workers Compensation
Compensation
Manager Php 433.00 124,800.00
Total 124,800.00

Table 4.2 shows the annual compensation to indirect labor for the year 2020 of PhP

124,800.00. It was assumed that it was the same in the year 2021 and in the year 2022.

Table 4.3. Utilities

Monthly Annual
Utilities
Consumption Consumption
Electricity Php 2,000.00 Php 24,000.00
Water 410.00 4,900.00
Telephone and Internet 1,199.00 14,388.00
LPG 700.00 8,400.00
Total Php 4,309.00 51,688.00

The table above present the utilities expenses in the year 2020 amounting to Php

51,688.00 that will increase of 10% in 2021 that would result to amount of Php 56,856.80.

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Lastly the computed utilities expense for the year 2022 following the 10% increase per year

is Php 62,542.48.

Water. A colorless, transparent, odorless, tasteless liquid that forms the seas, lakes, rivers,

and rain and is the basis of the fluids of living organisms.

LPG. Liquified Petroleum Gas, also called LPG, GPL, LP Gas, liquid petroleum gas or

simply propane or brutane, is a flammable mixture of hydrocarbon gases used as a fuel in

heating appliances and vehicles.

Electricity. The company will be using electricity as the main source of power and for the

manual and machine operation of the business.

Repairs and Maintenance

Table 4.4
Repair and Maintenance

Monthly Cost Annual Cost

Maintenance 600.00 7,200.00
Total 7,200.00

Table 4.4 shows the allocated budget for the maintenance of machineries and

equipment for the year 2018 amounted to Php 7,200.00. The allocated budget was the same

as on the year 2019 and 2020 as it was assumed that the maximum allocated budget for repair

and maintenance is PhP 7,200.00.

Table 4.5. Manufacturing Tools and Supplies

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 Description Quantity Unit Cost Total Cost

Gloves 10 (packs) 40.00 400.00

Apron 4 100.00 400.00
Mask 10 pcs 250.00 250.00
Hairnet 1 dozen 100.00 100.00
Pot Holder 4pcs 35.00 140.00
Big Bowl 4 200.00 800.00
Spatula 6 199 1194.00
Measuring Spoon
1 120 120
and cups
Plastic Shoes 1 250 250
Total 3,654.00

The table above presents the annual cost that will be incurred in the procurement of

factory tools and supplies for the 1st year of operation amounting to Php 3,654.00. It was

assumed that the same supplies will be needed for 2021 and 2022 with no changes in the

price of the product.

Table 4.6. Maintenance Supplies

Description Quantity Unit Cost Total Cost

Broom 2 65.00 130.00
Rags (Doormat) 5 85.00 425.00
Dust Pan 2 25.00 50.00
Garbage Bag 1 roll 35.00 35.00
Trash Can 2 79.00 158.00
Soap 10 55.00 550.00
Dishwashing Liquid 5 40.00 200.00

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 Mop 1 125.00 125.00
Gloves 2 159.00 318.00
Sponge 15 25.00 375.00
Fire Extinguisher 1 1200.00 1200.00
First Aid Kit 1 450.00 450.00
Total 3,991.00

Table 4.6 shows the annual cost of procuring the maintenance supplies for the year of

2020 amounted to Php 3,991 It was assumed that the same maintenance supplies will be

needed for 2021 and 2022 with no changes in the price of the product.

Table 4.7. Depreciation Expense

Salvage Useful Depreciation

Cost
Value Years Expense
Gas Stove 979.75 -
Weighing Scale 500.00 -
Caserole 708.00 -
Heat Gun 1,697.00
LPG Tank 1,700
Total 5,584.75
Administrative Expenses

Table 5. Office Supplies

Description Quantity Unit Cost Total Cost

Ballpen 10 pcs 7.00 70.00
Business Receipts 4 pads 29.75.00 119.00
Calculator 1 pc 199.00 199.00
Envelope 5 pcs 3.00 15.00

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 Pencil 1 box 37.5 37.5
Folder 3pcs 5.00 15.00
Record Book 2 pcs 38.00 72.00
Sharpener 1box 15.00 15.00
Stapler 2 pcs 70.00 140.00
Staple wire 3 boxes 7.00 21.00
Total 757.00

The table above shows the total expenses incurred in the procurement of office

supplies amounted to PhP 757.00. It was assumed that the same office supplies will be

needed for 2021 and 2022 with no changes in the price of the product.

Table 6. Admin (Compensation Schedule)

Position Amount of Salary

Daily Monthly Annually
Manager 443.00 10,400.00 124,800.00
Total 124,800.00

The above table present the administrative expense for the year 2020 amounted to

PhP 124, 800.00.

Selling Expenses

Table 7. Advertising Expense

Promotional Tool Quantity Unit Cost Total Cost

Tarpaulin 10pcs 90 900.00
Internet Marketing 1,500.00
Free Taste 50 bottles Cost of our prod . X

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 50pcs=

I guess these are

good for 200person

as free taste
Flyers 250pcs 12 3,000.00
Total Advertising

Expense

It can be seen from the table above the total expenses of Php that will be incurred

upon promoting the product for the year 2020. This is an aggressive promotional campaign

for the 1st year of operation to generate awareness to business and consumer market not only

in the province of Batangas but also in national market coverage. On the next year of

operation, promotional cost would decrease by 25% or Php resulting to total promotional

expense of Php. Because of the continuous growth of the business based on the demand of

the business and consumer market, the promotional cost for the third year of operation would

also decrease of 30% from the promotional expense on 2022 which is resulted to Php.

Table 8. Logistic

Monthly Total Cost

Distribution/Transportation Cost 2,000.00 24,000.00
Communication Expense 1,000.00 12,000.00
Total 36,000.00

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 The logistic expense of the business for the year 2020 is amounted to Php 36,000.00

which includes distribution or transportation cost of 24,000.00 and 12,000.00 for

communication expense.

Revenue

Table 9. Main Product

Annual Sales Price per unit Annual Sales

Volume
2018 18,159 15.00 272,382
2019 22,164 15.00 332,465.40
2020 26,597 15.50 412,260.17

Marketing Aspect

The products to be offered by the Barakoffee is the 160g of barako coffee flavoured

jam.

The prices of the product are as follows:

Selling Price (Year 2020)

Particulars Cost
Direct Materials
Direct Labor
Factory Overhead
Operating Expense
Unit Cost
 Mark up (35%)
Selling Price 15.00

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Selling Price (Year 2021)

Particulars Cost
Direct Materials
Direct Labor
Factory Overhead
Operating Expense
Unit Cost
Mark-up (40%)
Selling Price 15.00

Selling Price (Year 2022)

Particulars Cost
Direct Materials
Direct Labor
Factory Overhead
Operating Expense
Unit Cost
Mark-up (44%)
Selling Price 15.50

The product will be distributed using indirect channel all throughout the Region IV-A

CALABARZON.

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 In order to have demand for the product, the ALK will promote their product with the

use of tarpaulin, leaflets and sponsorship. The ALK will allocate PhP 17,700 for the year

2018, PhP13,275.00 for the year 2019 and PhP 9,292.50 for the year 2018.

Management Aspect

Since ALK Alkaline Bottled Water Station is a new business the organizational chart is

composed of 1 supervisor, 2 workers and 1 Utility/Delivery Worker.

The employees will be working 6 times a day. The workers and utility/delivery

worker will be paid PhP200 per day. The supervisor will be paid PhP 300 per day. For the

year 2020, there will an additional worker due to the increase of production. There are no

benefits included since the structure is a project based.

Figure 2. Organizational Chart

Financial Aspect

The following assumptions were used by the proponents in the computation and

analysis of the financial capacity and stability of the firm.

1. Initial Capital Requirement

The business has an initial capital of Php 80,000.00 contributed by the partners in

equal amount.

2. Working Days

There will be six (6) working days in a week, an average of twenty-four (24) working

days in a month and two hundred eighty-eight (288) days in a year at eight (8) hours a day.

3. Accounting Reporting Period

The business would adopt the calendar year of operation starting January 2020.

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4. Purchases

a. The volume of the purchases would increase proportionately with the increase in

production.

b. Purchase discounts shall be taken up at the start of the operations. It shall be taken

up at a rate of 2%.

c. Purchase of direct materials and indirect materials is 20% on credit.

d. Every year end, 95% of the credit purchases would be paid.

5. Sales

a. The initial selling price per bottle of spread is Php 59.05 for retailers and Php 64.95

for consumers.

b. Increase in selling price is brought by many factors such as production increase and

an average of 3% per year based on the average inflation rate of 3% from five (5) years.

c. Cash sales are equivalent to 90% of gross sales and credit sales would be 20% on

the gross sales.

d. Collection of credit sales is 95% annually of the total credit sales throughtout the

year.

6. Inventory

a. The FIFO method would be used in valuing the inventory.

b. There is no work in process inventory.

c. Finished goods ending inventory is 5% of the current months total goods available

for sale.

7. Labor

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 a. Labor rate for the first year was Php 335.00 per day for the worker and rate is

expected to increase due to inflation at 3%.

b. The manager is entitled to receive salary allowance to increase 3% annually.

c. The part time bookkeeper would receive a salary of Php 1,500.00 monthly.

d. Payments of salaries would be done every 15 th and 30th day of the month. No

salaries would be set up at the end of every month.

8. Employee Benefit

SSS, Philhealth and fringe benefits of the workers are part of the manufacturing

expense.

9. Utilities

A utilities expense would be allocated 70% to factory and 30% to office. Utilities

expense is expected to increase due to inflation of 3% and increase in production of 20% for

a total of 23% rate.

10. Rent Expense

a. Rent expense is assumed to be Php 8,000 per month and assumed to be fixed

throughout the year and the following years.

b. Rent expense would be allocated to the factory and office according to the land

each occupies. (70%-factory, 30%-office).

11. Maintenance Expense

a. Maintenance expense increase is based on the average inflation and production rate

of 23%.

b. Maintenance expense would be allocated to the factory for 70% and office for

30%.

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12. Property, Plant and Equipment

a. Acquisition of equipment, furniture and fixtures is on a cash basis. No additional

machinery would be acquired within five (5) years of operations,

b. The firm will use the straight line method of depreciation with no residual value.

c. Factory equipment, furniture and fixture would have a seven (7) years useful life.

d. Office equipment, furniture and fixture would have a five (5) years useful life.

13. Leasehold Improvements

The firm will not be having a major improvement in the paint location. Only minor

development of the location is needed and it will be expensed as incurred. Leasehold

improvements would have a five (5) years useful life.

14. Advertising Expense

Advertising Expense is estimated to increase 3% per year.

15. Partner’s Equity

a. Withdrawal is allowed for the partners in the first year of operation. All partners

are allowed to withdraw 90% of their total share in the income.

b. Withdrawal is always allowed if the result of the operation is likely.

c. Remaining profits are shared equally by the partners in accordance with the

agreement of the partners as stipulated in the contract.

18. Inflation Rate

Inflation rate as peg at an average rate of 3% per year is provided by the National

Statistics Office.

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