Summary of Assumptions

Formation of Partnership, Investment and Capital Distribution

I. Modern Living Enterprises, a business formed through a partnership, is composed of the

following individuals:

a. Mary Lyn Agias, Wilfredo Baje III, Hannah L. Baquilta, Kate P. Galdones, Charisse

M. Gonzaga, Hanskierstein Imperial, Emanuel E. Lacaya, Rocila Mae P. Martinez, Chyna Marie

S. Redillas, Princes Hilary E. Refugio, Nolbert A. Roxas, Mary Gleaveal W. Tabasa, and Willa

Mae J. Villagracia who are all equal in monetary contribution.

b. Each partner will contribute Php 325,370. 50 and is beyond willing to extend industrial

services for the betterment of the business, thus called industrialist-capital partners.

c. All partners share profit and loss equally in the business.

d. Princes Hilary E. Refugio, with her expertise in managerial duties and responsibilities,

will take charge as the President of the organization and will be assisted by Emanuel Lacaya.

II. Individual partners have enough financial capacity and there is no need for any loan

application as additional investment to the business’ capital.

III. Machines, Furniture, Equipment and Fixtures are purchased through online shopping with

Lazada as our number one source.

IV. The raw materials are locally purchased within the establishments in Dipolog City like Viven

Marketing and Bolim Trading.

Capital Requirement

Year 1
Raw Materials
₱ 2,627,651.52

Utilities Expense ₱ 68,880.00

Store Equipment ₱ 19,298.00
Office Equipment ₱ 26,789.00
Office Furniture ₱ 40,319.00
Fixtures ₱ 12,377.00
Direct Labor Expenses 1,428,960
Indirect Labor Expenses

Total Unit Production 4,224,274.52

Cost
Pre-Operating Expenses 5,537.00

CAPITAL 4,229,811.52
REQUIREMENT
In the operation of the business

a. There will be a scheduled pre-opening schedule on February 08, 2018 and by then, the

business is already producing its products.

b. Buying of raw materials for both the shoe guard and umbrella shield is scheduled every

Wednesday and Saturday of the week.

c. The production of shoe guard and umbrella shield will continue daily from Monday to

Saturday.

d. The business operates 8 hours a day, 6 times a week, and 26 days a month. It does not operate

on Sundays and holidays.

e. The business accepts product reservations but gets 50% of the payment from the customers

upon reservation.

Sales

a. All sales of MLE are on cash basis for the purpose of ease in liquidation.

b. The mark-up of the product is at 55%. The Mark up prices of the products will decrease at 5%

annually with consideration to the sales of the business.

2018 2019 2020

Withou
Products t mark Percentag Percentag Percentag
up price e of e of Mark e of Mark
markup Price up Price up Price
Shoe Guard ₱ ₱ ₱ ₱
55% 50%
(Adult) 98.50 219.00 197.00 45% 179.00
Shoe Guard
₱ ₱ ₱
(Kids) 55% 50% ₱
81.00 180.00 162.00
45% 147.00
Umbrella ₱ 55% ₱ 50% ₱ 45% ₱
Shield
296.00 658.00 592.00 538.00
(adult)
Umbrella
₱ ₱ ₱ ₱
Shield 55% 50% 45%
226.33 503.00 453.00 412.00
(Kids)

c. Sales increase at 10% annually.

Expenses

a. Depreciation of equipment, furniture and fixtures are computed using the straight line method.

b. The business provides employee benefits such as SSS, PhilHealth and Pag-IBIG as per

regulations and as a responsibility of the business.

c. The payment for the rent of the land which is Php 12,000.00 is given on the last Friday of

every month and its rate increases at 3% every year.

d. Utilities expense will increase 0.72% annually.

e. Office supplies expense and janitorial supplies expense remain constant annually with Php

7,000.00 and Php 1,000.00 respectively.

f. Both the direct and indirect labor expenses increase annually at a rate of 33%.

Production

a. The business have no beginning and ending raw material and work-in-process inventory as the

production system is efficient and most importantly, the production workers know their way into

the business.
Break-even Point
Umbrella Shield (Adult)

Dep
Unit price / Estimated
Fixed Costs Variable Costs

Equipment 19,298 Raw materials 1,108,224.00

Office Equipment 26,789 Direct Labor 240,000

Fixtures 12,377
Office furniture 40,319.00
Office Supplies 7,000.00

Janitorial Supplies 1,000

Utilities increase .72 68,880

In direct labor 1,188,960

Rent expense 12,000
Total P 1,376,623.00 Total P 1,348,224.00

 3,744 units produce per year

 14,976 all products produce within a year (Shoe Guard (for Adults and Kids) +

Umbrella Shield (for Adults and Kids)

 370 selling price

3,744 /14976=0.25 ( Mix in Unit)

P 1,348,224.00 /3744=360.10 (Variable costs Unit)

370- 360.10=9.9 (Contribution Margin)

9.9x.25=2.48 Weighted Average Contribution Margin)

  12.2 ( over all weighted average contribution margin)

¿ Costs
¿
¿ all weighted average contribution margin

php P 1,376,623.00
¿
12.2

=111,854 ( over all BEP units)

111,854 x . 25= 27,963(BeP units)

BeP in Pesos = Units x selling price

= 27,963 x 370

= Php 10,346,310

Checking:

Selling price: Php 10,346,310

Less: Variable costs: Php 10,069,476.3

Php 276,833.7

Less : Fixed Costs Php 276,833.7 (27,963x 9.9)

Umbrella Shield (Kids)

 Fixed Costs Variable Costs

Equipment 19,298 Raw materials ₱ 847,379.52

Office Equipment 26,789 Direct Labor 240,000

Fixtures 12,377
Office furniture 40,319.00
Office Supplies 7,000.00

Janitorial Supplies 1,000

Utilities 68,880
In direct labor 1,188,960
Rent Expense 12,000
Total P 1,376,623.00 Total 1,087,379.52

 3,744units produce per year

 14,976 all products produce within a year (Shoe Guard (for Adults and Kids)+
Umbrella Shield(for
Adults and Kids
 302 selling price

3744/14,976 =.25 ( Mix in Unit)

1,087,379.52/ 3744units =290.43 (Variable costs Unit)
302 - 290.43 =11.57 (Contribution Margin)
11.57 x.25=2.89 ( Weighted Average Contribution Margin)
 12.2 ( over all weighted average contribution margin)

¿ Costs
¿ all weighted average contribution margin
php 1,376,623.00
¿
12.2

=111,854 ( over all bep units)

111,854 1,933 x . 25= 27,963( (BeP units)

BeP in Pesos = Units x selling price
 =27,963x 302
= Php 8,444,826

Checking:
Selling price: Php 8,444,826
Less: Variable costs:Php 8,121,294.09
Php 323,576.91
Less : Fixed Costs Php 323,576.91 (27,963x11.57)
0

Shoe Guard (Adult)

Fixed Costs Variable Costs

Equipment 19,298 Raw materials 368,784.00

Office Equipment 26,789 Direct Labor 240,000

Fixtures 12,377
Office furniture 40,319.00
Office Supplies 7,000.00

Janitorial Supplies 1,000

Utilities 68,880
In direct labor 1,188,960
Rent Expense 12,000
Total P 1,376,623.00 Total 608,784
  3744 pairs of shoe guard Produce per year
 14,976 all products produce within a year (Shoe Guard (for Adults and Kids)+
Umbrella Shield(for
Adults and Kids
 179 selling price

3744/14,976 =.25 ( Mix in Unit)

608,784/3744 units =162.60 (Variable costs Unit)
179 –162.60=16.4 (Contribution Margin)
16.4x.25=4.1 ( Weighted Average Contribution Margin)
 12.2 ( over all weighted average contribution margin)

¿ Costs
¿ all weighted average contribution margin
php P 1,376,623.00
¿
12.2

=111,854 ( over all bep units)

111,854 x .25= 27,963(BeP units)

BeP in Pesos = Units x selling price
=27,963 x 179
= Php 5,005,377

Checking:
Selling price: Php 5,005,377
Less: Variable costs:Php 4,546,783.8
Php 458,593.2
Less : Fixed Costs Php 458,593.2 (27,963 x 16.4)
0
 Shoe Guard (Kids)

Fixed Costs Variable Costs

Shoe Guard Kids
Equipment 19,298 Raw materials 303,264.00

Office Equipment 26,789 Direct Labor 240,000

Fixtures 12,377
Office furniture 40,319.00
Office Supplies 7,000.00

Janitorial Supplies 1,000

Utilities 68,880
In direct labor 1,188,960
Rent expense 12,000
Total P 1,376,623.00 Total 543,264

 3744 pairs of shoe guard Produce per year

 14,976 all products produce within a year (Shoe Guard (for Adults and Kids)+
Umbrella Shield(for
Adults and Kids
 156 selling price

3744/714976=.25 ( Mix in Unit)

543,264/3744 units =145.10 (Variable costs Unit)
156 –145.10=10.9 (Contribution Margin)
10.9x.25=2.73 ( Weighted Average Contribution Margin)
 12.2 ( over all weighted average contribution margin)

¿ Costs
¿ all weighted average contribution margin
php P 1,376,623.00
¿
12.2
 = 111,854 ( over all bep units)
111,854 x. 25= 27,963(BeP units)
BeP in Pesos = Units x selling price
=27,963 x 156
= Php 4,362,228

Checking:
Selling price: Php 4,362,228
Less: Variable costs: Php 304,796.7
Php 4,057,431.3
Less : Fixed Costs Php 4,057,431.3 (27,963x 10.9)
0
Sales Forecast
Year 1 (2018)
Average
Average
Quantity Of
Projected
Units Amount total
Product Price Quantity of units
Produced yearly
(Produced for the
(Per Month)
year)
Shoe Guard 312
₱ 219.00 3744 ₱ 819,936.00
(Adult)
Shoe Guard 312
₱ 180.00 3744 ₱ 673,920.00
(Kids)
Umbrella 312
₱ 658.00 3744 ₱ 2,463,552.00
Shield (Adult)
Umbrella 312
₱ 503.00 3744 ₱ 1,883,232.00
Shield (Kids)
Total       ₱ 5,840,640.00

Year 2 (2019)
Average
Average Projected
Quantity Quantity of
Product Price units Amount total
Of units Produced for
produced the year
Per month  
Shoe Guard ₱ 1,229,280.00
₱ 197.00 520 6240
(Adult)
Shoe Guard ₱ 1,010,880.00
₱ 162.00 520 6240
(Kids)
Umbrella ₱ 3,694,080.00
₱ 592.00 520 6240
Shield (adult)
Umbrella ₱ 2,826,720.00
₱ 453.00 520 6240
Shield (Kids)
Total       ₱ 8,760,960.00
 Average Average Projected
Quantity Quantity of units
Product Price Of units Produced for the Amount total
produced year
Per month  
Shoe Guard
₱179.0 780 9360 ₱ 1,675,440.00
(Adult) 0
Shoe Guard
₱147.0 780 9360 ₱ 1,375,920.00
(Kids) 0
Umbrella Shield
₱538.0 780 9360 ₱ 5,035,680.00
(adult)
0
Umbrella Shield
₱412.0 780 9360 ₱ 3,856,320.00
(Kids)
0
Total       ₱ 11,943,360.00
Year 3 (2020)

Return on Investment

Year 2018 (1st year)

Net Income
Return on Investment= x 100 %
Investment
P 1,397,778.06
Return on Investment= x 100 %
P 4,229,811.52
¿ P 0.3304587103682577 x 100 %
¿ 33.04587103682577 or 33.05 %
Year 2019 (2nd year)

P 2,413,645.98
Return on Investment= x 100 %
P 4,229,811.52
¿ P 0.5706273125 x 100 %
¿ 57.0627312491∨57.06 %

Year 2020 (3rd year)

Total revenue−Total cost
Return on Investment= x 100 %
Total Cost
P 3,319,561.8
Return on Investment= x 100 %
P 4,229,811.52
¿ P 0.7848013521 x 100 %∨78.48 %
Growth Strategy

Since Modern Living Enterprises sells Shoe Guards and Umbrella Extensions which are

rather new products in the Dipolog City market with the latter being just a recently introduced

product, MLE shall implement the Marketing Expansion Strategy as part of the business’ growth

strategy. It is also called Market Development for its nature of introducing products to new

markets. These new markets include residents coming from Dapitan City. Given that MLE will

meet its objectives financially, it shall consider expanding its market area into the barangays of

Dapitan City with the aims to increase profit and be able to attract potential buyers coming from

the area. Also, since before MLE started to operate officially, it has already considered the

market skimming strategy. But if the business already achieve its financial objectives, then it

shall consider the market penetration—if and only if the business is sure that it is financially

stable and that lowering the prices of the product will not affect the sales of the products.

As mentioned before, the products are new, therefore, there are lots of changes or

improvements that could possibly be made. Product development is another strategy MLE shall

utilize to add functional features or make improvements to the products’ design and better

functionality like adding a thick rubber covering to the front tips of the Shoe Guard to protect the

Shoe Guards from bumps into sharp contact and tearing the main material of the product.

Each and every growth strategy is crucial since it affects the future performance, image

and even the future income of the company. It could contribute to the overall operation of the

business as well. Modern Living Enterprises will look up to more opportunities and chances to

grow and prosper in all its aspects cohesively.

Exit Strategy
Along a certain business venture, uncertainties and failures are never inevitable,

thus, there should be an exit strategy for a business for it to be able to adjust and even

develop further what remains of the business. A business exit strategy is an

entrepreneur’s strategic way of selling his/her ownership in a company to investors or

another company. An exit strategy gives the owner a way to reduce or liquidate his

stake in the business and if the business is successful, make a substantial profit. It is

never considered as a negative thing. Even so, it gives a certain business an

opportunity for brand new ventures in the future.

In the case of Modern Living Enterprises, since it is a partnership form of

business, the owners have considered that if one or two of the partners decide to leave

the business for his or her own merit while the others will not consider doing the same

thing, selling the business to a willing and most potential and qualified partner who sees

himself as the one who’ll continue the business operations is a top option. But if all the

partners decide to move on with their individual purposes, then the business’ exit

strategy will be a business shutdown or permanent closing of the business. Moreover,

the business partners can support each other in achieving other professional goals in

life.

The business concludes that a business shutdown and business selling are the

prevalent choices of exit strategy. The first, the business chooses for its less

complicated process of implementation while the latter may be more complicated but it
ensures that the partners get a slight income from the business even though the

ownership will be changed and transferred.