Notre Dame of Midsayap College Midsayap,

Cotabato

Master in Business Administration

A FEASIBILITY STUDY IN ESTABLISHING A VULCANIZING AND REPAIR SHOP IN THE

MUNICIPALITY OF PIGCAWAYAN

In Fulfillment of the Requirements in Development ofBusiness (BA640)

UNDER

NICK L. ADUANA, CPA, MBA

(Teacher)

CRISTINE T. GOMOBAR, CB, RCA

(Student) September 22,

2017

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 PREFACE

This Project is a part of the Feasibility Study under the Development Business course in the

Master in Business Administration Graduate School at Notre Dame of Midsayap College. This is a

feasibility study of establishing a feasibility study in establishing a vulcanizing and repair shop in

themunicipality f Pigcwayan, Cotabato.

This project makes everyone who interested to get knowledge and information about

establishing a vulcanizing and repair shop business before making a decision to investment. It

alsoincludes preoperational process and operation process of establishing a vulcanizing and

repair shop.

I expect that my project will provide benefit more and more interested person.

Moreover, if they are any error in this project or whatever, my ground made an

apology at this opportunity.

2|Page CRISTINET.GOMOBAR
 CONTENT

Preface p.2

Content -p.3

Chapter 1: Introduction ------------------------------------------------------------------p.4

Chapter 2: Industry Profile --------------------------------------------------------------- p.6

Chapter 3: Marketing Feasibility Challenge -----------------------------------------p.9

Chapter 4: Technical Feasibility Study ------------------------------------------------p.12

Chapter 5: Financial Analysis ------------------------------------------------------------ p.17

Chapter 5: Summary-----------------------------------------------------------------------p.30

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 Chapter 1

Introduction

Significance of the Project

This study entitled “Feasibility of Establishing a Vulcanizing and Repair Shop in the Municipality

of Pigcawayan,” could be of help to the following:

The Researchers. They will be familiar with the needed information that is essential in handling

the business.The Future Researchers. The result of this study would be a source of information

to the future researchers who will be involved in this kind of business.

The Prospective Investors. This study will be a guide to a future investors and for them to realize

that putting up business like this is very feasible.

Project Objectives

The Long Range Objectives of the Project looks forward to bethe most competitive vulcanizing

and automotive repair shop in Pigcawayan and nearby municipalities. The proponent dreams of

making profit and staying long in the business.

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For operating and establishing competitive vulcanizing and automotive repair shop in

Pigcawayan, I am having some objectives.

1. To earn profit at less investments.

2. To satisfy our customers providing best quality service at effective price.

3. Providing the service at low cost by providing the best quality at affordable price.

4. To know a fair return on the capital invested by the owner.

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 Chapter 2
Industry Profile

Nature of Industry

The proposed name of the firm is “Gomobar Automotive Repair Shop”

. The owner will register the firm with the Department of Trade and Industry (DTI) and Local

Government Unit of Pigcawayan. The firm will be registered as single proprietorship. The

businessis vulcanizing and automotive repair shop.

Situation of Industry

The automotive repair shop industry in the locality ofPigcawayan only attends to bicycle and

tricycle vulcanizing and repair services. These are the traditional vulcanizing shop of the people

living in rural areas.

Services

This study is limited only the vulcanization of motorcycle tires, and repair of the tire like the tire

rim (rayos), where statistics used were based on the franchised and legalized 7,300 tricycle

units in Pigcawayan. Single motor services were not included and others. Financial analysis is

limited to the costof

6|Page CRISTINET.GOMOBAR
equipment, tools, and materials used, as well as the process of production expenses, target

markets, and projected market grab (share) with the financial analysis on profit statement and

Rate of Return of Investment (RROI).

To organizational aspect, this study justifies the type of business organizational it intends to put

up. This aspect will also define the duties and responsibilities of the required personnel and

their compensation.

The production aspect, shall limits its discussion with emphasis to the location of the working

shop, shop facilities, shop size and the services offered.

As to financial aspect, the possible sources of financing the profit will be shown as well as the

organized presentation of financial tools and analysis to justify the viability and feasibility of the

project.

Vision

Gomobar Automotive Repair Shop envisions to become a well-known progressing and efficient

shop in the locality of Pigcawayanand province of Cotabato.

Mission
The mission of “Gomobar Automotive Repair Shop “is to become the foremost shop in the area

and nearby municipality. We willattend clients and give quality services at very reasonable

price.

Its Economic Mission is to operate and grow at a profitablerate through sound economic

decision.
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 Chapter 3

Marketing Feasibility Challenge

A business organization such as that of a vulcanizing and repair shop operates on a very

competitive organization. Business uses the limited resources available to them as well as for

the limited markets of their services. In such situation a project must have a clear idea of the

role which it plays in society. It should always aim to offer better quality services that of its

competitors for this is the only deciding factor in which a consumer could decide because the

prices of the services in this company does not vary with each other. Also the best suited

marketing strategy as well as the proper advertisementprocedures was revealed in this part.

Market Study

In Pigcawayan, there are only few vulcanizing and repair shops offering a business which is

something big and unique. The business is different from the vulcanizing shops shown in

pathways of the main roads (Bangketa). The minimum number of vulcanizing stand is five (5)

sets and two (2) sets of wheel balancing equipment are available in the shop, with the rate of

increase tricycles in the city, there is a need to install a vulcanizing shop, which is big and has

enough space to

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accommodate at least five customers at a time. According to Land Transportation Office there

are at least 5,200 tricycles registered in Pigcawayan alone aside from the tricycle

moving/operating in the adjacent town. In this situation, the researchers believed that there is

a big market.

Market of The Product

The primary market place of the business of Pigcawayan other nearby places also the target

market. The manager himself will transact with the tricycle drivers in Pigcawayan and in other

nearby places wherein there are many existing tricycle driving in the streets of Pigcawayan for

the vulcanizing service andrepair.

Marketing Strategies

On the store site the business will simply place a billboards and the numerous poster and

banners will be located in different places.

The main marketing strategy to be used is by informing the tricycle drivers about the shop and

offering lower prices of the products. There is no need for the proponent to advertise the

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shop eagerly because there is a big demand in vulcanizing and repair business in the City.

Supply and Demand Analysis

Market Demand. The proponent considers the analysis of supply and demand of

the project. As per survey, the demand for vulcanizing and repair shop is one of the great

demands the tricycle in the city. In this connection there will be no problem as far as the

demand for the services offered by the shop is concerned. According to the present vulcanizing

shop owners (small time) this project is still blooming, thereby allowing a bigger demand for the

future and still giving an opportunity for earning for those who are interested in getting into

this kindof business.

Market Supply. Supply and materials to be used in the operation of the business

are not considered a problem because there are many equipment and materials available for

purchase nearest the project, therefore, there is no limitation on the source of supply in

operating the said business. Pigcawayan, being one of the business centers in the province have

enough of supplies and materials for vulcanizing and repair shop where materials for the

project can easily be secured.

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 Chapter 4 Technical Feasibility Study

This part of the study was consisted of the necessities in handling the product and it also

discuss the store site and the renovation of the shop building.

Location

The location of the shop should be in that can reach by many people. The place should have a

small workplace to accommodate customers and other tricycle drivers.

The store site will be located at Poblacion 2, Pigcawayan where anybody in the area could

access the shops. The vicinity map of the store was presented in Figure 4.

Building Renovation

It is estimated that the shop to be renovated will cost P6,000.00 pesos that means this amount

was necessary in the renovation of the building shop.

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The shop site will be renovated in the description appropriate for the vulcanizing and repair

services, 5 working places for the vulcanizing and 2 sets for wheel balancing and repair shop.

The office of the manager was build inside the shop and the cashier windows as well. The store

area should be at least 8 meterswide.

Source of the Products

The main source of the products are the leading suppliers of vulcanizing materials in Metro

Manila that offers a lowwholesale price which means lower cost of the products.

Machineries and Equipment

The following are the equipment needed by the project

1. Air Compressor. It is necessary in providing air for the tire when it is already vulcanized.
2. Calculators / Adding Machine. It is usually used by the

cashiers and sales clerk for the computation of the sold items.
3. Healing plate (stall). This equipment is important/necessary

in heating the rubber strip in order to cover the damaged part of the tire.
4. Lighter / Matches. These items are also needed in lightning the heating plate with

diesel.

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 5. Wheel Balancing Equipment. This in needed in repairing the rim of the tire when the

tire is not already circular in

nature (oblong tire).

6. Drum. This is necessary in locating the damaged part of the

tire (butas).
7. Mechanical Tool Set. This is very important in loosing and

fixing the metal screw of the tire.

8. Rubber Strip (Adhesive). This is the main material used in covering the broken interior of

the tire.

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 FIGURE 2
VULCANIZING PROCESS CHART

TIRE REMOVING

AIR FILLING THE TIRE

(INTERIOR)

LOCATING THE DAMAGED PART OF THE

TIRE

HEATING THE INTERIOR PART OF THE

TIRE WITH RUBBER STRIP

REMOVING FROM THE HEATING PLATE

AIR REFILLING THE INTERIOR TIRE

FIXING THE TIRE

FIGURE 3
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 REPAIR AND WHEEL BALANCING

TIRE REMOVING

LOOSEN ALL THE BROKEN RIM

SUPPORT (RAYOS)

PLACE THE WHEEL/TIRE RIM IN THE

WHEEL BALANCING EQUIPMENT

BALANCING THE RIM SUPPORT (RAYOS)

TO REPLACE THE BROKEN RAYOS

REMOVING FROM THE TIRE BALANCING

EQUIPMENT

FIXING THE RIM TO THE TIRE WITH

BALANCED SUPPORT

FIX THE WHEEL/TIRE TO THE TRICYCLE

Chapter 5

16 | P a g e CRISTINET.GOMOBAR
 Financial Analysis

The total capital requirements for the project will amount to about P75,000.00. the equity shall

be the owner’s investment without borrowing money from any financial institutions. Since the

business is only a small scale industry, the proponent decided not to borrow money from the

bank. The proponent’s capital is enough to operate a small business like a vulcanizing shop. The

following table shows the detail of the total capital requirement of the proposed business.

Table 1

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 TOTAL PROJECT COST

PARTICULARS AMOUNT

Building / Shop Renovations P6,000.00

Advanced Deposit for Rentals

(2 months – P3,500 per month) 7,000.00

Machineries and Equipmet

Air Compressor P20,000.00

Heating Plates(5pcs) 2,500.00

Wheel Balancing Eqpt.(2pcs) 4,000.00

MechanicalTool Set 5,000.00

Drums(2pcs)

500.00 32,000.00

Working Capital 30,000.00

Total Project Cost P75,000.00

Table 2
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 SCHEDULE OF REVENUE

(SERVICE FEE COLLECTED)

PARTICULARS DAILY MOTHLY ANNUALLY

Vulcanzizing P750.00 P22,500.00 P270,000.00
Fees
Wheel/Tire P800.00 24,000.00 P288,00.00
Repair Fees
Total Revenues P1,550.00 46,500.00 P558,000.00

Sample Computation:

Vulcanizing

50 pcs x P15.00 = P750.50/day

Wheel Tire Repair

10 pcs x P80.00 = P800.00/day

Table 3

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 COMPUTATION OF INCOME TAX

SUBJECT FOR INCOME TAX INCOME TAX

1st year

+ P2,500.00 = P3,939.00
P31,400 – 30,000

2nd year

= P 16,309 – x 15% + P 2,500.00 =

P35,300 – 30,000

3rd year

P39,590 – 30,000

4th year

P46,309 – 30,000

P4,946.00

5th year
= P1,400 x
15% + P
2,500.00 = P2,710.00

= P5,300 x
15% + P2,500.00 = P3,295.00

= P9,590 x 15%
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P49,500 – 30,000 = P19,500 x 15% + P2,500.00 = P5,425.00

Table 4 SCHEDULE OF DEPRECIATION

PARTICULARS COST USEFUL LIFE DEPRECIATION

Shop Space P6.000.00 5 years P1,200.00
(Renovation)
Machineries and P32,000.00 5 years P6,400.00
Equipment
Total P7,600.00

Table 5

SCHEDULE OF OPERATION EXPENSES

PARTICULARS YEAR YEAR YEAR YEAR YEAR

1 2 3 4 5
SALARIES/Wages P456,000 P501,600 P551,700 P606,936 P667,630
Rent 42,000 46,200 50,820 55,902 61,492
Light & Water 6,000 6,600 7,260 7,986 8,785
Supplies 12,000 13,200 14,500 15,972 17,569
Depreciation 7,6000 7,600 7,600 7,600 7,600
Repair & 1,000 1,100 1,210 1,331 1,464
Maint.

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 License and 2,000 2,200 2,420 2,662 2,928
Permit
Total P526,600 P578,500 P635,510 P698,389 P767,468

Table 6

SCHEDULE OF SALARIES AND WAGES

1 Manager / Onwer P9,000.00

1 Secretary 6,000.00

3 Vulcanizers P4,000.00 each 12,000.00

2 Wheel Repair Men P4,000.00 each 8,000.00

1 Helper 3,000.00

Total Salaries and Wages P 38,000.00/month

387,000.00 x 12 months = P456,000.00/year

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 Table 7 PROJECTED

INCOME STATEMENT

PARTICULARS YEAR YEAR YEAR YEAR YEAR

1 2 3 4 5
Vulcanizing P270,000 P297,000 P326,700 P359,370 P395,307
Wheel / 288,000 316,800 348,480 388,328 421,661
Tire Repair
Gross 558,000 613,8000 675,180 742,698 816,968
Revenue
Less: 526,600 578,500 635,510 698,389 767,468
Operating
Expensing
Income 31,400 35,300 39,590 46,309 49,500
before tax
Less: Prov. 2,710 3,295 3,939 4,946 5,425
For Income
Tax
Net Income P28,690 P32,005 P35,651 P41,363 P44,075

Average Income = P36,367.00

=48%
75,000.00

Table 8

CASH FLOW STATEMENT

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Net Income P28,690.0 P32,005.00 P35,651.00 P41,363.00 44,075.00
After tax 0

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 Add: Non cash 7,600.00 7,600.00 7,600.00 7,600.00 7,600.00
Items 2,710.00 585.00 644.00 1,007.00 479.00
Amortizatio n
and Depreciatio
n Increase
in tax liability

Total P39,000.0 P40,190.00 P43,895.00 P49,970.00 P52,154.00

0
Add: Cash P30,000.0 P6,900.00 P10,919.00 P15,309.00 P20,306.00
bal. Beg 0
Cash end P69,000.0 P109,190.0 P153,085.0 P203,055.0 P255,209.0
0 0 0 0 0
Table 9 PROJECT

BALANCE SHEET

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Cash P69,000.0 P109,190. P153,085. P203,055. P255,209.
0 00 00 00 00
Advance 7,000.00 7,000.00 7,000.00 7,000.00 7,000.00
deposit
Bldg. 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Renovation
Less: Accum (1,200.00 (2,400.00 (3,600.00 (4,800.00 (6,000.00
Depreciati ) ) ) )
on

Machinerie 32,000.00 32,000.00 32,000.00 32,000.00 32,000.00

s

24 | P a g e CRISTINET.GOMOBAR
 Less: Accum (6,400.00 (12,800.0 (19,200.0 (25,600.0 (32,000.0
Depreciati ) 0) 0) 0) 0)
on

P106,400. P138,990. P175,285. P217,655. P262,209.

00 00 00 00 00
Taxes 2,710.00 3,295.00 3,939.00 4,946.00 5,425.00
Payable
Owner’s 75,000.00 P103,690. P135,695. P171,346. P212,709.
beg. Cap 00 00 00 00
Add: Net 28,690.00 32,005.00 35,651.00 41,363.00 44,075.00
Income
Total P103,690. P135,695. P171,346. P212,709. P246,784.
Operating 00 00 00 00 00
Expenses
Total Liab. P106,400. P138,990. P175,285. P217,655. P262,209.
And 00 00 00 00 00
Owner’s Equity

Financial Analysis

The following are the barometrics/indicators used in the study in order to test the profitability

of the proposed project/business. Average rate of return cash payback period and the present

value analysis.

1. Average Rate of Return = Average/Annual Income

Total Investment

= P36, 367

75,000

ARR = 48%

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 2. Payback Period
Payback period indicates the number of years required to fully recovered the

initial investment. This figureshows in the following computations.

CPP = Total Project Cost

Net Income + Depreciation

= P75,000

P28,690 + 7,660.00

= 75,000

36,290

= 2.067 x 12 months

CPP = 2 years and 8 months

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 3. PRESENT VALUE ANALYSIS

YEAR CASH INFLOWS PV of P1 At 12% PRESENT VALUE

1 P 36,290.00 0.893 P32,406.97
2 36,605.00 0.797 31,565.19
3 43,251.00 0.712 30,794.47
4 48,963.00 0.636 31,140.47
5 51,675.00 0.587 30,333.23
Total Present Value of Cash Inflow P156,240.57
Less: Total Project Cost 75,000.00
Net Present Value P81,240.57

CHAPTER 5
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 SUMMARY

Findings of The Study

It has been found out that there is feasibility and viability in the establishment of Vulcanizing

and Repair Shop in PIgcawayan. It is such a potential and lucrative business.The management

aspect showed that single proprietorship is the best organizational set-up to be used in this

kind of project. The project can easily be established under the control of one man. Line type of

organization is used in project because it has a direct flow of authority from the top position

down to the subordinate level.

The business will be offered in the proper town of Pigcawayan and the business will focus on

Vulcanizing and Repair Services.

The technical procedure in operating the business is very simple. The proponent need to

construct the building shop and makes a proper design of the work place in order to operate

the business properly.

Financial study showed that the project requires enough capital to start the business. Financial

analysis showed that theproject is moderately profitable and that the total investment could be

recovered within 2 years and 8 months.

The proposed project is also socially and economically desirable.

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Conclusion
Based on presented information regarding the establishment of Vulcanizing and Repair Shop in

Pigcawayan, it can beconcluded that this venture is feasible because of the following:

1 That the organization best suited is single proprietorship.

2 That there is a demand for the proposed project.
3 That there is more profit to be derived from the business.
4 That the maintenance of this project is very simple.
5 That the business is very feasible.
6 That the business is socially desirable and gives benefit not only to the owner,

customers but also to the government.

Recommendation

In the light of conclusion, the following are recommended:

1 Individuals who are interested in Establishing a Vulcanizing and Repair Shop should find

good location such as cities and urban areas because that is the place where most

costumers/buyers come.
2 They should hire of qualified and skilled workers in the business so that they can

carry out business more

effectively.
3 Different marketing strategies should be applied in this business in order to make

the products and services more attractive.

4 Capitalization requirements should balance the procurement of materials and

equipment in the operation of the said

business.
5 Systematic financial procedures and control system be given more emphasis.

29 | P a g e CRISTINET.GOMOBAR