CHAPTER 3
TECHNICAL STUDY
This chapter discusses how the products are to be produced, the technology to be
used, and the cost of the product. This includes the detailed presentation of the production
process from land preparation, to planting, to growing, to harvesting, up to packaging the
product ready for delivery to the target market.
Production Process/Process Flow
The main product to be produced by the proposed venture will be fresh table
grapes. In this section, the proponents will discuss the production process from land
preparation, to planting until it bears fruits up to the time when the product is ready for
delivery.
Operation Process Flow. The step-by-step procedures in farming the grapes are
discussed individually including the cost and expenses related to each process. Below is
the procedure of planting and growing grapes to the delivery of the product.
Figure 3-1
Operation Process Flow
Clearing. Clearing the area includes removal of all tree growth, stumps, large
stones and other obstacles from the area. There will be five (5) people and will be paid by
contract. The cost of clearing the area is eight thousand (₱ 8,000) pesos since the land
area is equivalent to one (1) hectare.
Table 3-1
Clearing Cost
Pegging the planting pattern. After the land area had been cleared, the next step
is to peg the planting area carefully to be sure to plant the seedlings at the right density to
avoid fungal diseases. Pegging process will also mark the hole to be dug where to plant
the grapes seedlings. The distance between grapes vine is 1 meter each. This is to assure
that the vine will not cross each other roots because this is the type of plant that grow for
more than 20 years.
There will be five (5) people paid with the amount of three (₱3.00) per stick to
peg a hectare. Since there is approximately nine thousand (9,000) grape vines that can be
planted in 1 hectare land so it assumed that there will be nine thousand (9,000) peg
markers, the total labor cost would amount to twenty-seven thousand pesos (₱ 27, 000).
The pegging materials that will be use is bamboo stick and since one of the proponents
has bamboo plant in that place the estimated cost for bamboo stick is 700 hundred (₱
700) per one thousand (1000) sticks the cost amounted to six thousand three hundred
pesos (₱ 6,300).
Table 3-2
Pegging Cost
Holing. The hole where the grapes seedlings will be planted is deep enough to
accommodate root system for the root to spread out in all direction and to avoid crowding
and bending. In digging the hole, the top soil must be separated from the sub soil. This
will be done through manual labor. The labors will be paid at ₱___ per hole for a total of
₱_____ for the whole land area. They will use shovel that is provided by the
___________. It will be done by 4 persons in 4 days. Figure __ shows how holing is
done.
Purchase of grapes seedling. The grapes nursery where the seedlings will be
purchased is ___km away from the area of plantation which is less ______ hours travel
by land. The proponents will purchase _____ seedlings
Trellis construction.
Pruning and training.
Fertilization.
Application of insecticide.
Harvesting.
Washing of Grapes.
Packaging.
Delivery.
Tool, Equipment, and Furniture and Fixtures
The tables below will show the list of equipment, needed tools, supplies, and
furniture and fixture needed in this venture. The assumption for the depreciation. The
table will show the yearly depreciation using the straight-line method. The figures are
derived based only on assumptions, such as the useful years of the equipment’s and the
scrap value. Only that equipment’s that are subject for depreciation are depreciated.
The operation’s equipment, furniture and fixture is shown in exhibit 7
Table 1
Table for the Schedule of items, Costs and Annual Depreciation
ITEM Acquisition Residual Useful Annual Accumulated Depreciation
DESCRIPTION Amount Value Life 2019 2020 2021 2022 2023
Furniture and 15,3 1, 1,377. 2,754 4,131 5,508 6,885
Fixtures 00 530 10 00 .00 .00 .00 .00
149,5 14,957. 29,914 44,872 59,829 74,787
Building Renovation 74 - 10 40 .80 .20 .60 .00
163,1 16, 14,686. 29,373 44,060 58,747 73,434
Office Equipment 88 319 10 92 .84 .76 .68 .60
789,48 63,9
Total Item Cost 7 91
72,549.5 145,099.1 217,648.7 290,198.2 362,747.8
Total Annual Depreciation 7 4 1 8 5
The formula for the depreciation using straight-line method:
Depreciation = (Original Cost – Scrap Value)/No. of Useful Years
Smaller equipment’s or tools which the price is less than three thousand will not be
subject to depreciation.
Location
The proposed project will be located along the road at Purok 6 Palili Sulop,
Davao del Sur at the place of our co researcher (mag search ug map!!!)
Building.
The proposed site of the business is a vacant lot at the side of the land area. The
researchers decided to build a. The building has a total floor area of square meters. The
researchers agreed to simplify the building to avoid too much expense. All the rooms
within the building will be constructed with concrete materials. One of these room will be
a storage room for the farm supplies and implements. The total cost of the building is
estimated at P149,574.00. This amount is capitalized and depreciated over 20 years.
Layout/Floor Plan
The researcher has made the layout of the office and the layout of the production
floor plan. This layout includes two major parts: 1) The office, where customers are
received and accommodated, and 2) the storage room.
Scheduling
The proposed business will have supervisors. For scheduling, the business will
operate every Sunday through Friday at 8:00 am to 5:00 pm. During Saturday the
business will not operate due to the owner’s religious convictions. Tables below shows
the operating schedule and the square foot capacity per day.
Table 2
3 Working Days Schedule
WORKDAYS Sunday Monday Tuesday Wednesday Thursday Friday
Morning 8:00 – 12:00 8:00 – 12:00 8:00 – 12:00 8:00 – 12:00 8:00 – 12:00 8:00 – 12:00
Afternoon 1:00 – 5:00 1:00 – 5:00 1:00 – 5:00 1:00 – 5:00 1:00 – 5:00 1:00 – 5:00
Table 4
Printer Capacity in Terms of Square Foot
Printer Capacity in Terms of Square Foot
Capacity
Annual
Year Sqr. Ft. /
Capacity
day
2019 378.46 118,080
2020 378.46 118,080
2021 378.46 118,080
2022 378.46 118,080
2023 378.46 118,080
The large format printer can print for 378.46 sq. ft. per day in 7.5 hours of
operation. Then this capacity then be multiplied to 312 days of operation in a year to
arrive to its annual capacity.
Operating Cost
Operating costs are expenses associated with the maintenance and administration
of a business on a day-to-day basis. The operating cost is a component of operating
income and is usually reflected on a company’s income statement.
Components of Operating Cost
A business’s operating costs are comprised of two components, fixed costs and
variable costs, which differ in important ways.
Fixed Costs
A fixed cost is one that does not change with an increase or decrease in sales or
productivity and must be paid regardless of the company’s activity or performance. Fixed
costs generally include overhead costs, and other examples of fixed costs include
depreciation of equipment.
Fixed costs can help in achieving economies of scale, as when many of a
company’s costs are fixed the company can make more profit per unit as it produces more
units. In this system, fixed costs are spread out over the number of units produced,
making production more efficient as production increases by reducing the average per-
unit cost of production.
Utilities
The term utilities may include: electricity and water. The table below shows the
utilities and their corresponding costs.
Table 5
Utilities expense computation
Utilities 2019 2020 2021 2022 2023
12,0 12,6 13,2 13,9 14,6
Water 00.00 14.40 60.26 39.18 52.87
53,9 56,6 59,5 62,6 65,8
Electricity 11.52 71.79 73.38 23.54 29.86
77,89 81,88 86,08 90,48 95,12
Total 9.52 7.97 0.64 7.96 0.95
The telephone and internet expense cost is P999 per month and when multiplied
by 12 months in a year, the annual cost is P11,988.00. This estimated annual cost is
assumed to increase by 5.12% every year as a result of inflation.
For the water consumption, the proponents estimate the cost at P1,000.00 or
P12,000.00 per year. Again, this will increase by 5.12% because of inflation.
The electricity consumption computation is presented in Table 24.
Table 6
Annual Electricity Consumption
Energy
Description Rate / Watts / Hr. / Monthly Annual
Hr. Hr. Day Cost/Day Cost Costs
Lamps and Lightings 9.6673 48 8 3.71 96.52 1,158.22
Total 9.6673 1,860 4,492.63 53,911.52
Those presented in Table 24 are the equipment that consume electricity in the day-
to-day operation, which is computed through variable costing. Each has an energy rate of
P9.6673 per kilo watt hour. The wattage per hour is multiplied by hours used per day and
then multiplied by energy rate per hour to arrive at cost of electricity per day. Cost of
electricity per day is multiplied by days of operation per month which is 26 days to arrive
at monthly cost. This cost per day is multiplied by 312 days of operation in a year to get
the annual expense in electricity.
Table 27 presents the operating expenses that will be incurred in the operation.
Table 7 Operating Expense, Items and Corresponding Cost Per Month and Per Year
Operating Expense, Items and Corresponding Cost Per Month and Per Year
Operating Expenses Monthly Expense Annual Expense
Salaries and Benefits Expense 98,250.08 426,182.08
Utilities Expense 6,491.63 77,899.52
Depreciation Expense 6,045.80 72,549.57
Office Supplies Expense 577.80 6,933.60
Rent Expense 12,000.00 144,000.00
Advertising Expenses 1,500.00 18,000.00
Taxes and Licencies 11,572.00
Total 130,602.80 825,986.77
The figures of operating expenses above are also shown in the income statement.
The monthly expense are all multiplied for 12 months of operation in a year.
Figure 1 Business Location
Business Location
Figure 2 Layout/Floor Plan
Layout/Floor Plan
Exhibit 1 Equipment, Furniture and Fixtures, and Utilities
Equipment, Furniture and Fixtures, and Utilities
Shovel Office Table
Chairs
Sofa Telephone
System
Lamps and Lighting Trashcan Steel Wire
Tampers Magazine and Reading materials Twine Rope
Water Bucket Wrench Hole Digger
Pliers Pruning Tools Screwdriver
Sharpening Tools Hammer Grape lug
boxes
Grape Bins Folding Saw Pickaxe
Hand held scale 55 Gallon Water Barrel