SORSOGON STATE COLLEGE

BULAN CAMPUS

Bulan, Sorsogon

ADER’s Rice Mill

A Feasibility Study

Submitted by:

Michelle G. Adra

Submitted to:

Dr. Michael B. Bongalonta

Professor
Executive Summary

ADER’s Rice Mill is a service-type and merchandising business that will be

situated along the road in the central poblacion of Brgy. Beguin, Bulan, Sorsogon. It will

be established in an area of around 36 square meters with a width and length of 6 meters.

ADER’s Rice Mill considers as its main catchment area the housing societies of Brgy.

Beguin, Bulan, Sorsogon which are involved in rice production.

The proposed business will be engaged in milling of paddy into rice and retailing

of unhusked rice or paddy, rice husk, rice bran, brewer’s rice and other by-products. It

will have 3 employees composed of machine operator, helper, and delivery man that will

be working for at least 8 hours a day. The owner will be the cashier and will be working

hands on in the business. The business will remain open from 8:00 am until 5:00 pm.

The owner of ADER’s Rice Mill will invest P120, 000 cash for the operation of

the proposed business. The rice milling machine having a fair market value of P300, 000

with 20 years useful life, weighing scale costs P100, 000 with 25 years useful, delivery

equipment worth 80,000 with a useful life of 15 years, and land & building with a value

of P150, 000(Land – P80, 000 & Building – P70, 000 with a useful life of 20 years) will

also be invested in the business.

The business will earn profits for Years 1 to 5 of P111,004, P156,178, P175,014,

P194,788, and P221,563 respectively. The Return on Investment of the rice mill from

Years 1 to 5 are 14.80%, 20.82%, 23.33%, 25.97%, and 29.54% respectively. The owner

will recover the investment for only 2 years and 6 months.

2
 CHAPTER I

Introduction

The Philippines is an agricultural country with a land area of 30 million hectares,

approximately 47% of which is agricultural land. The country’s agriculture is made up of

4 sub-sectors – farming, fisheries, livestock, and forestry, which together employ 39.8%

of the labour force and contribute 20% of Gross Domestic Product (GDP). The country’s

main agricultural crops are rice, corn, coconut, sugarcane, bananas, pineapple, coffee,

mangoes, tobacco, and abaca with which the country exports these around the world

including United States, Japan, Europe, and ASEAN countries.1

Rice production in the Philippines has grown significantly since the 1950’s. The

Philippines is the 8th largest rice producer in the world, accounting for 2.8 % of global

rice production. In 2010, nearly 15.7 million metric tons of pre-husked rice or paddy

were produced and accounted for 21.86% of gross value added in agriculture and 2.37%

of GDP. Among all the regions in the Philippines, Bicol region is the 6 th supplier of rice

in the country.2

Municipality of Bulan which is located in the province of Sorsogon in Bicol

Region is engaged in agricultural production. Major exports of this town are from coastal

waters, rice, copra, and abaca fiber. Processing, production, exports, and distribution of

agricultural raw materials and products will be easier if this town will utilize modern

agricultural equipment to be used in agricultural sectors. Due to lack of equipment and

machineries, there is a need of service that will process raw materials into finished

products, unhusked rice into edible rice, corn into corn grits and etc.

3
 It is along this premise that the study was conducted to determine the investment

opportunity of rice milling services and retailing of paddy or unhusked rice and rice

milled by-products in Brgy. Beguin, Bulan, Sorsogon.

4
 CHAPTER II

Market Study

Brief Background of the Study

ADER’s Rice Mill is a service-type and merchandising business that will be

situated along the road in the central poblacion of Brgy. Beguin, Bulan, Sorsogon. It will

be established in an area of around 36 square meters with a width and length of 6 meters.

The proposed business will be engaged in milling of paddy into rice and retailing of

unhusked rice or paddy, rice husk, rice bran, brewer’s rice and other by-products. The

business will remain open from 8:00 am until 5:00 pm.

Target Market

The proposed business considers as its main catchment area the housing societies

of Brgy. Beguin, Bulan, Sorsogon which are involved in rice production. Keeping in

view the location of the proposed business, housing societies nearby the area can also be

considered as target market.

Supply Analysis

There are many rice milling businesses that are currently operating here in Bulan,

Sorsogon.The households of Brgy. Beguin which are involved in rice production have to

go to the center poblacion of Bulan, Sorsogon just to avail rice milling service and to buy

or sell their paddy and rice milled by-products. Some of them avails the services being

offered by the truck rice milling businesses. As per the target market, there is no existing

supply of rice milling service and retailing of unhusked rice and rice milled by-products

5
to the households of Brgy. Beguin, Bulan, Sorsogon because there is no rice milling

business located in the said barangay. Due to some other factors, it is expected that 20%

of the total demand will be supplied by the existing rice milling business.

Demand Analysis

Based on the lists that were given by the Coordinator of the Department of

Agriculture of Brgy. Beguin, a total of 61 households are engaged in rice production with

a total area of approximately 35 hectares.

NAME OF FARMER PER NAME OF FARMER PER

HECTARES HECTARES
HOUSEHOLDS HOUSEHOLDS
1. Noel Oseo .25 32. Dennis Guelas 1.00
2. Danilo Gonzaga .25 33. Sonny Guelas .25
3. Anita Girado .40 34. Marilyn Bitancor .50
4. Jose Oseo .40 35. Arnel Geocado .50
5. Noli Alabin .25 36. Santos Bitancor .25
6. Rizalino Oseo .25 37. Danilo Bitancor .25
7. Jaime Bitancor 1.50 38. Joel Begonia .25
8. Rodrigo Grieta .75 39. Rey Loilo .75
9. Celso Glodo .75 40. Dario Geocado .50
10. Rodney Balaston .50 41. Ramon Gollena .50
11. Nelly Guelas 1,50 42. Roel Girado .50
12. Rebecca Balaston .50 43. Salvador Oseo Jr. .25
13. Ranilo Oseo .25 44. Remy Mazarate .25
14. Salvador Oseo Sr. .50 45. Napoleon Loilo 1.00
15. Reynaldo Enraca .70 46. Simplicio Peñalosa .50
16. Elvie Gestiada 1.50 47. Arnel Gime .25
17. Rufino Gestiada .25 48.Terso Balaston 1.00
18. Agatona Girado .50 49.Bobong Balane .25
19. Sarex Gersalia 1.00 50. Danilo Gime .25
20. Rudy Guelas 1.50 51. Rodrigo Placer .25
21. Romeo Guamos .25 52. Norie Loilo .50
22. Faustino Bitancor .50 53. Antonio Gersalia .25
23. Redentor Geocado .50 54. Florintino Manallo Jr. .25
24. Lorenzo Macareza 1.00 55. Basilisa Baconawa 2.00
25. Suelo Guamos Jr. .25 56. Jorie Bitancor 1.00
26. Nardito Gersalia 1.00 57. Rodel Begonia .25
27. Regino Gersalia 1.50 58. Pedro Calupit .50

6
 28. Marcos Bitancor .25 59. Jerry Oseo .50
29. Aramis Loilo .25 60. Jose Bitancor Jr. .25
30. Teofilo Bitancor .75 61. Edwardo Bitancor .25
31. Jose Gonzaga .25

As per report of harvest of unhusked rice of the Department of Agriculture-

Municipal Office, a range of 130 metric tons to 180 metric tons or an average of 155

metric tons of unhusked rice were harvested semi-annually by the farmers of Brgy.

Beguin. This is equivalent to 155, 000 kilograms or 3100 sacks of unhusked rice. Yearly,

the farmers are harvesting for an about 310, 000 kilograms or 6, 200 sacks.

An interview was conducted to 20 out of 61 or approximately 33% of total

households to be able to determine the demand of the products and services offered. It

was determined that 60% to 80% or an average of 75% of their total harvest of unhusked

was processed into edible rice for their personal consumption and 20 to 30% or an

average of 25% is sold. All of them are willing to avail rice milling service if it offers the

same price and quality services as what the existing rice milling businesses are being

offered. It was also determined that only 50% are willing to sell their rice bran and

brewer’s rice.

Moreover, one of the existing rice milling business was interviewed and the

following data were gathered.

No. of Kilograms of No. of Kilograms of No. of Kilograms of No. of Kilograms of

Unhusked Rice Rice Rice Bran Brewer’s Rice

50 kilograms or 1 sack 20-30 9-15 1-3

Average 25 10 2

Percentage 50% 24% 4%

7
 Due to some factors and threats, ADER’s Rice Mill expects to get a demand of

80% of the total average harvest.

Expected Demand from the Total Average Harvest Annually

Rice Milling Service 186, 000 kg

Unhusked Rice 62, 000 kg

Expected Demand of By-Products from the Total Rice Milled

Rice Bran 22, 320 kg

Brewer’s Rice 3, 720 kg

Supply and Demand Analysis

There is no existing supply of rice milling service and retailing of rice milled by-

products to the households of Brgy. Beguin. Since ADER’s Rice Mill will be offering the

same quality and price of products and services as compared to the competitors outside

the barangay, it is expected that the total demand will be supplied by the business. Thus,

ADER’s Rice Mill expects to get a demand of 80% from the total average harvest per

year.

8
The graph shows the Supply and Demand Gap Analysis

Supply -
62,000kg
Gap -
248,000kg
Total Demand -
0 310,000kg

Supply Gap

80%

SWOT Analysis

9
Market Positioning Strategy

The ADER’s Rice Mill will cater the needs of households of Brgy. Beguin, Bulan,

Sorsogon with regards to rice milling service. It offers the convenience of being in the

center poblacion of the barangay. The products and services that will be available to the

customers include milling of rice and sale of milled rice by-products. It has storage

facilities that will keep the products in proper condition and will also be offering delivery

services. The business will put the customers first by ensuring quality products and

services are offered to them.

Promotion

The promotional plan of the proposed business will be to advertise ADER’s Rice

Mill through social networking sites and radio advertisement. Promotional Fliers will also

be distributed to the public. In addition, posters and tarpaulins will be posted to specific

locations.

Pricing

In determining the price of rice milling services and sale of by-products, the
proponent will use the competitor-based pricing in which the price is set based on what
the competing businesses are charging. The objective of this pricing strategy is to avoid
price competition that may bring drawback to the proposed business. The following are
the price per kilo grams of products:

1. Rice Milled P2.50 per kilo

Average Buying Rate Average Selling Price

2. Rice Bran P5.00 P7.00

3. Brewer’s Rice P10.00 P15.00

10
4. Unhusked rice P15.00 P17.00

Distribution Channel

The ADER’s Rice Mill distribution channel will be the direct distribution channel

since the business will be located at the residence of its target market that offers rice

milling services. In addition, retail distribution channel will also be used for buying and

selling of by-products directly to its customers on behalf of the producers.

CHAPTER III

11
 Technical Study

Production Layout

The Rice Mill will be established for an area of 36 square meters has a width and

length of 6 meters. The construction of the building is in accordance with the layout

prescribed by the Code on Sanitation of the Philippines regarding the sanitary operations,

Bureau of Fire Protection (BFP) with regards to the installation of electric connections

and proper ventilation, and Department of Health & Food and Drug Administration in

connection with the proper care of the vicinity of the business.

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Process Layout

The process of milling the paddy or rice grains into rice involves 15 steps. 3

Step 1 – paddy is dumped in the intake pit feeding the pre-cleaner where straw, chaff and

empty grains are removed (A).

Step 2 – pre-cleaned paddy moves to the rubber roll husker and rice husks are removed

by the aspirator (B).

Step 3 – mixture of brown rice and unhusked paddy moves to the separator

Step 4 – unhusked paddy is separated and returned to the rubber roll husker

Step 5 – brown rice moves to the destoner where small stones, mudd balls etc. removed

by de-stoner (C).

Step 6 – de-stoned, brown rice moves to the 1st stage (abrasive) whitener

Step 7 – partially milled rice moves to the 2nd stage (friction) whitener

D – Coarse (from 1st whitener) and fine (from 2nd whitener) bran removed from the rice

grain during the whitening process

Step 8 – milled rice moves to the sifter to remove the small brokens/brewer’s (E).

Step 9a – (for simple rice mill) ungraded, milled rice moves to bagging station

Step 9b – (for more sophisticated mill) milled rice moves to the polisher1

Step 10 – Polished rice, will move to length grader

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Step 11 – Head rice moves to head rice bin

Step 12 – Brokens are move to brokens bin

Step 13 – Pre-selected amount of head rice and brokens move to blending station

Step 14 – Custom-made blend of head rice and brokens move to bagging station

Step 15 – Bagged Rice are delivered to customers

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Scheduling

. The proposed business will remain open for 8 hours a day from 8am to 5pm with

noontime break. It will have 3 employees composed of machine operator, helper, and

delivery man that will be working for at least 8 hours a day. The owner will be the

cashier and will be working hands on in the business.

The ADER’s Rice Mill will be offering rice milling service and buying & selling

of unhusked rice & rice milled by-products such as rice husks, rice bran, and brewer’s

rice.

Sanitary Operation

The proponent will obtain first a sanitary permit from Department of Health as

stated in the Code on Sanitation of the Philippines. Adequate potable water supply and

conveniently located comfort room shall be provided to employees. Also, proper uniform

will be required to all employees. Moreover, the workplace including machineries and

equipment will be kept clean and sanitary. All wastes incident to operation will be

collected, stored, or disposed of in a manner to prevent health hazards and pollutions.

Machineries and Equipment

The machineries and equipment that will be used by Rice Mill throughout its

operation is identified and shown in the following:

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Rice Milling Machine4

This machine will be

utilized to process the

paddy or rice grains into

edible rice that is

sufficiently milled and free

from impurities.

Delivery Equipment5

It will be used to deliver

the milled rice and by-

products to the customers.

Calculator with Receipt6

Printer

This device will be used to

compute the amount that

the customer will have to

pay.

16
Weighing Scale7

This will be used to

measure the weights or

mass of paddy, milled rice,

and rice milled by-

products.

Quality Control

The proponent will then implement its rules, policies and regulations necessary

for the business to operate efficiently and effectively. It includes implementing internal

controls, customer relationship, job management and other regulations that can help the

business to consistently meet the customer’s needs and expectation. The business will

have the proper maintenance of machineries and equipment to avoid malfunctioning and

shutdowns. Segregation of duties will also be observed for each job where incompatible

duties will not exist.

17
 CHAPTER IV

Financial Study

Financial Assumptions

 Revenue from rice milling service will increase by 5% annually.

 Sales from unhusked rice will increase by 5%.

 Ending inventory of rice bran and brewer’s rice is estimated to be 15% of the total

purchase for the year

 Purchases of unhusked rice, rice bran and brewer’s rice are expected to increase

5% annually.

 All purchases of unhusked rice are sold.

 Straight line method will be used for the depreciation of machinery, weighing

scale, building, and equipment. All have a salvage value of 10% of cost.

 Repair and Maintenance Expense is estimated to be 1,000 monthly.

 Supplies Expense will be 500 monthly.

 Utilities Expense will be 5,000 monthly and is expected to increase 5% annually

 Rice Milling Machine is estimated to have a useful life of 20 years.

 Weighing Scale, Delivery Equipment and Building are expected to have a useful

life of 25 years, 15 years and 20 years respectively.

 Salaries of delivery man, helper, and rice mill operator will be 4,500 monthly.

 License fees and legal expense will be 1,000 annually.

18
  Annual withdrawals of 50,000.

Capital Requirements

The owner of ADER’s Rice Mill will invest P120, 000 cash for the operation of

the proposed business. The rice milling machine having a fair market value of P300, 000

with 20 years useful life, weighing scale costs P100, 000 with 25 years useful, delivery

equipment worth 80,000 with a useful life of 15 years, and land & building with a value

of P150, 000(Land – P80, 000 & Building – P70, 000 with a useful life of 20 years) will

also be invested in the business.

Financial Breakdown

Cash Investment P120, 000

Expenditures:

1 calculator with receipt printer P2, 500

1 table P1, 000

6 Monoblock Chairs P1, 200

Supplies P500.00

1000 sacks P15, 000

20 rolls of straw P2, 000 (22, 200)

Excess P97, 800

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Preparation of Complete Set of Financial Statements

ADER’s Rice Mill

Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue from Milling P232,000 P243,600 P255,780 P268,569 P281,997

Income from Unhusked Rice P124,000 P130,200 P136,710 P143,546 P150,724

Income from Rice Bran P37,944 P46,538 P48,864 P51,306 P53,872

Income from Brewer’s Rice P15,810 P19,390 P20,360 P21,375 P22,450

Total Gross Income P409,754 P439,728 P461,714 P484,796 P515,043

Expenses:

Utilities Expense P60, 000 P63, 000 P66, 150 P69, 458 P 72, 930

Depreciation Expense P25, 050 P25, 050 P25, 050 P25, 050 P25, 050

Supplies Expense P6, 000 P6, 000 P6, 000 P6, 000 P6, 000

Salaries Expense P162, 000 P162, 000 P162, 000 P162, 000 P162, 000

Repairs &Maintenance P12, 000 P12, 000 P12, 000 P12, 000 P12, 000

Legal Expense P12, 000 P12, 000 P12, 000 P12, 000 P12, 000

Other Expense P21, 700 P3, 500 P3, 500 P3, 500 P3, 500

Total Expense P298,750 P283,550 P286,700 P290,008 P293,480

20
Profit P111,004 P156,178 P175,014 P194,788 P221,563

Computation of Revenue from Rice Milling Service

Annual Demand for Milling 186,000kg

X percentage of rice per kilograms of unhusked rice 50%

Total Milled Rice 93,000kg

X price per kilograms of rice milled 2.50

P232, 000

Computation of Sales from Retailing of Unhusked Rice

Annual Purchases 62,000kg

X Average Selling Price P17.00

Total Sales P 1, 054, 000

Computation of Sales from Retailing of Rice Bran

Annual Purchases 22, 320kg

X percentage of sale 85%

Total kilograms sold 18,972kg

X Average Selling Price P7.00

Total Sales P132, 804

Computation of Sales from Retailing of Brewer’s Rice

21
 Annual Purchases 3,720kg

X percentage of sale 85%

Total kilograms sold 3, 162

X Average Selling Price P15.00

Total Sales P47, 430

Schedule of Income from Unhusked Rice

Year 1 Year 2 Year 3 Year 4 Year 5

Beginning Inventory, Jan.1 0 0 0 0 0

Add: Purchases 62,000 65,100 68,355 71,773 75,361

Goods Available for Sale 62,000 65,100 68,355 71,773 75,361

Less: Ending Inventory, Dec. 31 0 0 0 0 0

Cost of Sales per kilo 62,000 65,100 68,355 71,773 75,362

X Cost per unit 15 15 15 15 15

Cost of Sales P930,000 P976,500 P1,025,325 P1,076,595 P1,130,430

Sales (SP-P17.00) P1,054,000 P1,106,700 P1,162,035 P1,220,141 P1,281,154

22
Gross Income P124,000 P130,200 P136,710 P143,546 P150,724

Schedule of Income from Rice Bran

Year 1 Year 2 Year 3 Year 4 Year 5

Beginning Inventory, Jan.1 0 3,348 3,515 3,691 3,876

Add: Purchases 22,320 23,436 24,608 25,838 27,130

Goods Available for Sale 22,320 26,784 28,123 29,529 31,006

Less: Ending Inventory, Dec. 31 3,348 3,515 3,691 3,876 4,070

Cost of Sales per kilo 18,972 23,269 24,432 25,653 26,936

X Cost per unit 5 5 5 5 5

Cost of Sales P94,860 P116,345 P122,160 P128,265 P134,260

Sales (SP-P7.00) P132,804 P162,869 P171,024 P179,571 P188,552

Gross Income P37,944 P46,538 P48,864 P51,306 P53,872

Schedule of Income from Brewer’s Rice

Year 1 Year 2 Year 3 Year 4 Year 5

Beginning Inventory, Jan.1 0 558 586 615 646

Add: Purchases 3,720 3,906 4,101 4,306 4,522

Goods Available for Sale 3,720 4,464 4,687 4,921 5,168

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Less: Ending Inventory, Dec. 31 558 586 615 646 678

Cost of Sales per kilo 3,162 3,878 4,072 4,275 4,490

X Cost per unit 10 10 10 10 10

Cost of Sales P31,620 P38,780 P40,720 P42,750 P44,900

Sales (SP-P15.00) P47,430 P58,170 P61,080 P64,125 P67,350

Gross Income P15,810 P19,390 P20,360 P21,375 P22,450

Schedule of Depreciation

ASSET COST SALVAGE USEFUL ANNUAL

VALUE LIFE DEPRECIATION

Rice Milling Machine P300, 000 P30,000 20 P13, 500

Weighing Scale P100, 000 P10, 000 25 P3, 600

Delivery Equipment P80, 000 P8, 000 15 P4, 800

Building P70, 000 P7, 000 20 P3, 150

Total Depreciation P25,050

Other Expenses (Outright Expense)

Year 1 Year 2-5

Calculator with receipt printer P2, 500 0

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Table P1, 000 0

Monoblock Chairs P1, 200 0

Sacks P15, 000 1,500

Straw P2, 000 2,000

Total P21,700 P3,500

ADER’s Rice Mill

Statement of Changes in Equity
Year 1 Year 2 Year 3 Year 4 Year 5

Beginning Capital, Jan. 1 0 P811,004 P917,182 P1,042,196 P1,186,984

Add: Investment P750,000 0 0 0 0

Profit P111,004 P156,178 P175,014 P194,788 P221,563

Less: Withdrawals P50, 000 P50, 000 P50, 000 P50,000 P50, 000

Ending Capital, Dec. 31 P811,004 P917,182 P1,042,196 P1,186,984 P1,358,547

ADER’s Rice Mill

Statement of Cash Flows
Year 1 Year 2 Year 3 Year 4 Year 5

Profit P111, 004 P156,178 P175,014 P194,788 P221,563

25
Add: Cost of Inventory, Beg.

Rice Bran 0 P16,740 P17,575 P18,455 P19,380

Brewer’s Rice 0 P5,580 P5,860 P6,150 P6,460

Depreciation P25,050 P25,050 P25,050 P25,050 P25,050

Investment P120,000 0 0 0 0

Less: Cost of Ending Inventory

Rice Bran P16,740 P17,575 P18,455 P19,380 P20,350

Brewer’s Rice P5, 580 P5,860 P6,150 P6,460 P6,780

Withdrawals P50, 000 P50, 000 P50, 000 P50,000 P50, 000

Total Cash Flows P183,734 P130,113 P148,894 P168,603 P195,323

Beginning Cash, Jan.1 0 P183,734 P313,847 P462,741 P631,344

Ending Cash Balance P183,734 P313,847 P462,741 P631,344 P826, 684

ADER’s Rice Mill

Statement of Financial Position

Year 1 Year 2 Year 3 Year 4 Year 5

ASSETS

26
Current Assets

Cash P183, 734 P313,847 P462,741 P631,344 P826, 667

Inventory-Rice Bran P16, 740 P17,575 P18,455 P19,380 P20,350

Inventory-Brewer’s Rice P5, 580 P5,860 P6,150 P6,460

P6,780

Total Current Assets P206,054 P337,282 P487,346 P657,184 P853,797

Non-current Assets

Rice Milling Machine P300,000 P300,000 P300,000 P300,000 P300,000

Accumulated Depreciation P13,500 P27,000 P40,500 P54,000 P67,500

Weighing Scale P100,000 P100,000 P100,000 P100,000 P100,000

Accumulated Depreciation P3,600 P7,200 P10,800 P14,400 P18,000

Delivery Equipment P80,000 P80,000 P80,000 P80,000 P80,000

Accumulated Depreciation P4,800 P9,600 P14,400 P19,200 P24,000

Building P70,000 P70,000 P70,000 P70,000 P70,000

Accumulated Depreciation P3,150 P6,300 P9,450 P12,600 P15,750

Land P80,000 P80,000 P80,000 P80,000 P80,000

Total Non-current Assets P604, 950 P579,900 P554,850 P529,800 P504,750

TOTAL ASSETS P811,004 P917,182 P1,042,196 P1,186,984 P1,358,547

27
LIABILITIES AND OWNER’S EQUITY

LIABILITIES 0 0 0 0 0

OWNER’S EQUITY P811,004 P917,182 P1,042,196 P1,186,984 P1,358,547

TOTAL LIABILITIES P811,004 P917,182 P1,042,196 P1,186,984 P1,358,547

& OWNER’S EQUITY

Schedule of Ending Inventory of Rice Bran

Year 1 Year 2 Year 3 Year 4 Year 5

Ending Inventory, Dec. 31 3,348 3,515 3,691 3,876 4,070

X Cost per unit 5 5 5 5 5

Cost of Ending Inventory P16,740 P17,575 P18,455 P19,380 P20,350

Schedule of Ending Inventory of Brewer’s Rice

Year 1 Year 2 Year 3 Year 4 Year 5

Ending Inventory, Dec. 31 558 586 615 646 678

X Cost per unit 10 10 10 10 10

Cost of Ending Inventory P5,580 P5,860 P6,150 P6,460 P6,780

28
Return on Investment (ROI) - A performance measure used to evaluate the efficiency

of an investment or to compare the efficiency of a number of different investments. ROI

measures the amount of return on an investment relative to the cost of investment.

Year 1 Year 2 Year 3 Year 4 Year 5

Profit P111, 004 P156,178 P175,014 P194,788 P221,563

Investment P750, 000 P750, 000 P750, 000 P750, 000 P750, 000

ROI 14.80% 20.82% 23.33% 25.97% 29.54%

Payback Period is the length of time required to recover the cost of an investment.

Payback Period = Initial Investment

Annual Cash Flow

Annual Cash Flow Excess

Year 1 P183, 734 P566, 266

Year 2 P313, 847 P252, 419`

Year 3 P462, 741 0 = 2.55 years or 2 years & 6 months

29
 Chapter V

Legal and Management Study

Nature of the Business

The proposed business will be registered as sole proprietorship with the

Department of Trade and Industry-Municipal Office and Local Government Unit of the

Municipality of Bulan. It aims to cater the needs of households of Brgy. Beguin, Bulan,

Sorsogon with regards to rice milling service and retailing of paddy or unhusked rice and

rice milled by-products.

Organizational Status

The figure below shows the organizational structure which manifests the lines of

authority, communication, rights and duties of the business.

Owner

Machine Delivery
Helper
Operator Man
30
Job Specification and Responsibility of Personnel

Owner -Manager of the proposed business

-Responsible for investing in the business

-Establishes and implements operating and administrative policies

-Responsible for collecting the amount due to customers

-Responsible & accountable for complying with business

requirements

Machine Operator

Qualifications Male or Female

18-35 years old

High school graduate

Must have knowledge in operating and repairing rice

milling machine

Responsibilities Responsible for operating the rice milling machine

Maintains and repairs the condition of the machine

Determines the weights of the products

Delivery Man

Qualifications Male

18-35 years old

Must know how to drive delivery equipment

Responsibilities Responsible for delivering the products to customers

Maintains and repairs the condition of the equipment

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 Helper

Qualifications Male

18-30 years old

Responsibilities Maintains the cleanliness of the business

Responsible for storing and carrying of products

Socio-Economic and Environmental Aspects

This deals with the benefaction of the proposed business in terms of socio-

economic and environmental aspects. The following are the benefits that will be derive

by the society to ADER’s Rice Mill:

Proponent – Implementation of the proposed business will enable the owner to

earn profits and generates cash that will improve her way of living.

Target Market – The business will provide quality products and services that

will satisfy the needs of the target market. It offers convenience of being close to their

houses.

Community – The business will provide job opportunities to the community.

Government – Government will surely benefit from the business in terms of

payment of license fees and taxes that serves as their one sources of revenue.

Waste Disposal

All wastes incident to the operations of ADER’s Rice Mill will be collected,

stored, and disposed at the back of the building. Rice milling machine, delivery

equipment, and weighing scale will be disposed at the end of its useful life and each will

have a salvage value of 10% of cost.

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 NOTES

1
“Philippines-Agriculture”, Retrieved from

www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Philippines-

AGRICULTURE.html on October 2, 2017.

2
“Agriculture in the Philippines”, Retrieved from

en.m.wikipedia.org/wiki/Agriculture-in-the-Philippines on October 2, 2017.

3
“Commercial rice milling system”, Retrieved from

www.knowledgebank.irri.or/step-by-step-production/postharvest/milling/milling-

systems/commercial-milling on October 3, 2017.

4
“VOS Machinery”, Retrieved from www.vosmachinery.com/Rice-mill-

equipment-for-rice-processing on October 5, 2017.

5
“Racal Motorcycles, Retrieved from www.racalmotorcycles.com on October 5,

2017.

6
“Staples”, Retrieved from www.staples3p.com/s7/image/Staples/s0215105 on

October 5, 2017.

7
“Scales for Weighing”, Retrieved from www.shutterstock.com on October 5,

2017.

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