Entrepreneurship Y4.pdf

Republic of the Philippines Department of Education PUBLIC TECHNICAL -VOCATIONAL HIGH SCHOOLS

Unit of Competency

Module No. 1

Module Title

:

Finalize Evaluated Business Plan

:

Finalizing Evaluated Business Plan

TABLE OF CONTENTS Module Title: Finalizing Evaluated Business Plan

1

How to Use this Module

1

Summary of Learning Outcomes

2

Pre-Test

3

Lesson 1 – Finalizing Evaluated Business Plan

4

Let Us Study

4

Sample of a Business Plan

5

Rubrics

20

Let Us Remember

23

How Much Have You Learned?

24

Post-Test

24

Reference

25

Key to Correction Acknowledgement

26 27

HOW TO USE THIS MODULE Welcome to the Module “Finalizing Evaluated Business Plan/s”. This module contains instructional materials and activities for you to complete. The unit of competency “Finalize Evaluated Business Plan” contains the knowledge, skills and attitudes required for the course Entrepreneurship. You are required to go through a series of learning activities in order to complete each of the learning outcomes of the module. Follow these activities on your own and answer the Self-Check at the end of each learning activity. If you have questions, don’t hesitate to ask your teacher for assistance.

1

COURSE

:

ENTREPRENEURSHIP IV

UNIT OF COMPETENCY

:

Finalize Evaluated Business Plan/s

MODULE TITLE

:

Finalizing Evaluated Business Plan/s

MODULE DESCRIPTION

:

This module covers the knowledge skills and attitudes required in finalizing evaluated businessplan.

SUGGESTED DURATION

:

10 Hours

SUMMARY OF LEARNING OUTCOMES: Upon completion of the module the students should be able to: LO1. Finalize Evaluated Business Plan/s

2

WHAT WILL YOU LEARN? At the end of this module, you should be able to: 1. Finalize the evaluated business plan based on the criteria set. WHAT DO YOU ALREADY KNOW? PRE TEST Let us find how much you have already know about the process of evaluating a business plan. Write the letter only of your answer in your quiz notebook? 1. Description of the target market is formed in the_________ part of the business plan. a. Marketing Plan b. Marketing Strategies c. Operating Strategies d. Production Strategies 2. Detailed description of products or services is in what part of the business plan? a. Marketing plan b. Production and technical plan c. Operation plan d. Organization and management 3. Which part of the business plan describes how the business has solved the problems? a. Statement of vision b. The marketing plan c. The problem need d. Production technical plan 4. Which part of the business plan presents the data on how the products/service will be further developed. a. Financial Plan b. Marketing Plan c. Production Plan d. Operation and technical Plan 5. What part of the business plan presents a clear statement of values critical to culture, integrity and activities of the business? a. Marketing plan b. Production plan c. Operational plan d. Statement of vision, mission and values

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LESSON I FINALIZING EVALUATED BUSINESS PLAN WHAT IS THIS LESSON ABOUT? This lesson deals with how to critically evaluate a business plan in order to come up with a final form. WHAT WILL YOU LEARN? At the end of the lesson, you should be able to: 1. Finalize the evaluated business plan based on the set of criteria. 2. Appreciate the importance of using business plan. LET US STUDY

WORDS TO STUDY Business Plan

is a step by step guide in the thorough operation of the business enterprise. Enterprise is a project activity commercial or industrial. It may also be an organizational activity. Assessment Tool is an instrument used to evaluate a performance. Evaluation is a rigorous analysis of completed or ongoing activities that determine or support management accountability, effectiveness and efficiency. Component is a uniquely identifiable input, part, piece, assembly or sub- assembly, system or sub – system that: 1. is required to complete or finish an activity, item or job. 2. Performs a distinctive and necessary function in the operation of a system or; 3. is identified to be included as a part of a finished, packaged and labeled item. Criteria is the statement of need, rules, standards or tests that must be used in evaluating a decision, idea, opportunity, program, projects, etc. to form correct judgment intended goal.

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Let us study an example of business plan with complete parts for you to use as benchmark in evaluating your fellow student’s business plan. I. Executive Summary Pumpkin Sorbet is cooperative in nature. It is to be run by the students themselves. Its initial capital for the first month of operation of PhP 90,000.00 will be coming from the student-owners by means of their investments as their stock in the business and from fund-raising activities as well. It is a food stall located inside the campus. Sorbet as the main product is to be manufactured by the proponents and to be sold and distributed to the target markets of 530 students daily include the MBHS students, the elementary pupils undergoing the feeding programs and selected hospitals in District II. Since the main product is made from pumpkin or squash, it promotes healthy, affordable and satisfying pumpkin derivative products. The proponents made an agreement with the MBHS administration on how they can be of help on the promotion of nutrition and on increasing the agricultural market especially on “Pagkaing Sapat Program”. They are currently on negotiation with the Principals of Cupang, Buli, and Alabang Elementary schools regarding the inclusion of the pumpkin sorbet in the dietary supplement among the students in the school’s feeding program. Since it is a vegetable-flavoured ice cream, it contains lots of nutrients like beta-carotenes and lutein. Pumpkin Sorbet aims to be the leading producer and provider of nutritious and affordable home-made ice cream inside the campus of MBHS and other Elementary schools near the said school. The total population of MBHS is 3,219 students and based on the registered school nurse, about 60 of them is malnourished. Estimating 10% of the population will buy the product. The studentowners will be trained and guided before they handle the business to avoid lapses and misconceptions. They will be supervised by their Business Education mentors. The management and operation of Pumpkin Sorbet starts from inventory and estimation of the volume of ice cream to be produced daily. Second is purchasing of the ingredients and raw materials needed to complete the preparation of the product. Third are production, packaging and freezing of the ice cream. Lastly, marketing and selling of the product. As a food stall, it ensures safety and sanitation of its business structures and cleanliness of the product itself. It aims to lower the price of the ice cream without sacrificing its quality. It has a shelf life of five days. Since Since it is new in the business line of MBHS, it initially aims to capture 10% of the existing market shares which is currently dominated by school canteen’s Kyla’s Ice Cream. And Creamline Ice Cream and Dan Eric’s Ice Cream which is located within the Espeleta Street. Pumpkin Sorbet is highly feasible, doable and socially desirable. It will help both the school and the students. This will serve as learning laboratory for the students of MBHS especially to the newbie. It will also be the inspiration for the aspiring business men to be a successful entrepreneur. The proponents of the business advocates being the leading promoter of agricultural products specifically squash. This will help increase the demands of pumpkin or squash, thereby economically promotes livelihood among the squash growing farmers in the area.

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II. Overview of the Business I.

Pumpkin Sorbet

II. Pumpkin Sorbet is both the business name and the name of its primary products. It is cooperative in nature. Specifically, it will produce a pumpkin-flavoured ice sorbet that will be dressed with sprinkles, marshmallows and peanuts that will surely fit and guarantee clientele’s satisfaction. It combines innovativeness and creativity in product concepts such as ice cream with pumpkin as the main ingredient. Dominating the existing ice cream businesses in Buli as well as in Muntinlupa will be its main thrust. III. It envisions to be the leading provider of high quality but affordable ice cream in Muntinlupa. Continues innovation of the product will be processed to supply the needs of Muntinlupeňos. Also, it will help ease the malnutrition in Muntinlupa through the help of pumpkin-flavoured ice cream and somehow help the squash farmers in terms of increasing the consumption and demand of squash in the city.

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III. Business Plan The Needs A. Malnutrition is one of the major problems, Filipinos school children are facing nowadays. Malnutrition means lacking of the right nutrition needed by the body resulting which may result to poor academic achievements. This has been correlated with educational research that malnutrition affects learning abilities of the child. It is also one of the reasons behind why we have unstable economy. Being in the public school, the proponents understood most of their classmates were not eating vegetable-rich products. By these assumptions, the proponents come up with a concept that will not only satisfy the clientele’s taste but also sustain the nutrients they need to be healthy aside from the fact, that using squash as main ingredient in foods will also boosts the agricultural demand for the squash. This will benefit the squash farmers in the country. This will help us save some money for the economy and may prevent importation this vegetable. B. Pumpkin Sorbet, a pumpkin-flavoured ice cream that will surely sustain the needs of the people, especially the poor children. Children today usually prefer meat more than vegetables. Ice cream is an all time Filipino favourite; this prompted the proponents to innovate the usual fruity ice-cream flavours with the use of vegetable such as pumpkin. The product has almost the same creaminess, puffiness, and consistency in texture as the commercially available ice-cream and will surely entice the taste of even the carnivorous children. Unknowingly they are already including vegetables in their diet. C. The proponents believe that the clientele will support the product because of its unique flavour and appearance. With this, Pumpkin Sorbet will be instrumental in helping alleviate malnutrition cases in the country especially those who are in the public school system. This may also serve as basis for other entrepreneurs to discover and innovate more nutritious vegetable flavoured foods other than ice cream; just like for example bitter gourd, eggplant and other vegetables. The proponents believe that this will not only address the health problems of the country but the agricultural economy as well.

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IV. Vision, Mission and Values Vision In the name of good customer service, Pumpkin Sorbet envisions as the leading advocate of healthy and natural food products, working with squash farmers cooperative and the leading providers of the best pumpkin ice-cream by the year 2010.

Mission Pumpkin Sorbet aims to produce and sell healthy, clean, nutritious and high quality sorbets for the clienteles and cooperatively works with the squash farmers in the city of Muntinlupa. This is through the dedication and passion of the management to produce this kind of product. In line with these, it sets a mission to achieve at least 20% return on equity after two years of operation. Values Pumpkin Sorbet as a business, commits to give its customers the best product it can serve. It will maintain its high standard of hard work, hygiene and sanitation in food preparation and handling and also the proper grooming and etiquette of the owners and personnel. The dedicated management will give their best to deliver with full sincerity and honesty for a better customer service. It will give a prompt, fast, accurate and best service to its clients. The management also sets to create a support system for the squash growing farmers in order to economically improve their standard of living.

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V. Market Profile A. Research and Analysis Today’s sorbet stalls are believed to have a little improvement for customer’s satisfaction. The proponents decided that they must undergo a careful observation in the business location. The management also underwent an official interview with the owners of current ice cream stalls in Buli. The proponents found out that customers are not that satisfied with the ice cream sold along the Espeleta Street and most of the products are not that nutritious to sustain body needs. The management believes that action must be taken primarily to make a new twist in preparing and serving ice creams that has very huge market in the nation. The current status of squash growing farmers in the city where the squash supply are to be taken was also observed and given attention in order to support them when the business starts its operations. With these premises, the proponents decided to produce pumpkinflavoured ice cream which will answer the needs of the students in the area. The market will be four (4) Elementary Schools and one (1) Secondary School. The target students are those who are malnourished and member of feeding program. B. Marketing Plan Table 1 Number of Target Ice Cream Buyers per Consumer Group Feeding Program Members Alaban Sucat Buli Cupang Populace MBHS MBHS g ES ES ES ES Total

Daily Monthly Yearly

3,160

60

87

84

45

68

316 6,952 83,424

36 792 9,504

52 1,144 13,728

50 1,100 13,200

27 594 7,128

49 1,078 12,936

Total

P o p u 3,504 l a t i o n 530 11,660 139,200

Based on the given consumer groups, the daily, monthly, and yearly target buyers are reflected through the assumption that 10% from MBHS group will buy ice cream from Pumpkin Sorbet and 60% from those feeding program members will buy every three days. During summer vacation, Pumpkin Sorbet will only serve their products in different hospitals where we can assure the sale and can help patient in sustaining their health.

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VI. Production/Technical Plan A. Product Description Pumpkin Sorbet is a business selling a pumpkin- flavoured sorbet. The finished product will be placed in a plastic cup and depending on the consumers, they will choose if they want their sorbet to have a dressing (sprinkles) or added flavour. The product as researched was proven nutritious palatable. Today’s Ice Creams are not that nutritious and of with poor quality. Pumpkin Sorbet made it with a new twist by means of using vegetable like squash as the main ingredient. The individual finished products will be package in a cup with design. There will also be packaging for wholesale purchases B. Operating Strategies The business will produce a pumpkin sorbet station with high quality contents and nutritious value as well. Pumpkin Sorbet will need raw materials to produce the goods to be sold. These include All- Purpose Cream, Condensed Milk, Cassava Starch, Cheese, Gelatine Powder, Powdered Milk, Vanilla Essence, and the main ingredients, Pumpkin. The proponents will be the one to produce the product. Raw materials will be purchased at Alabang Market or Lianas Supermarket where we can assure the quality and the aspects of perish ability. The proponents tried to interview the teachers and some students by offering them a free taste and made a comment after. During the operation, the business will think of more ideas on how to create more appealing and attractive products. C. Critical Risk Table 2 Pumpkin Sorbet’s Position in the Market Competitors Market Share Kyla’s Ice Cream 35% Dan Eric’s Ice Cream 45% Cream Line Ice Cream 20% Pumpkin Sorbet

Target 30% 40& 20% 10%

Based on the table showed, there are three competitors who dominate the market of Ice Cream in Buli. Pumpkin Sorbet aims 10% of the market share. Through creativity, uniqueness and innovation, the management believe that it will be achieved.

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VII. Organizational Plan A. Team Members

Figure 1: Organizational Chart B. Contribution to the Business

Owners– it is responsible for the management and accountability of the business itself, at the same time they are the ones who will produce the product. Sales Personnel – it is responsible for the advertisement, selling promotion of the product.

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VIII. Operational Plan A. Workflow

Pumpkin Sorbet has a very simple operational plan. It starts from inventory and estimation of the volume of ice cream to be produced daily, then Purchasing of Ingredients and raw materials needed. After purchasing, the production, packaging and freezing. Lastly, the marketing or the selling of the product.

B.

Monitoring and Evaluation Pumpkin Sorbet will manufacture at least thirteen (13) gallons of ice cream per day. It takes less than an hour to prepare the mixtures before freezing. The three (3) proponents divide the work among themselves. The production hour will be done after classes so as not to affect their studies. Since the shelf life is about 28 days, the possibility of producing for advance demand is highly considered. It will supply four (4) Elementary Schools (gallons each) and a Secondary School that will serve as its main market (4 gallons).

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IX. Sustainability I.

Financial Plan

Pumpkin Sorbet will need at least PhP 90,000.00 to start its operation in the market. This will be coming from the investments of the students who are willing to be involved in entrepreneurial practice like this. Also, since two of the proponents are Club Presidents and the other one is MBHS Chorale Leader, they may combine their talents to conduct fund raising activities to increase the capital investment of the business. Table 3 Monthly Expenses of Pumpkin Sorbet Product/Service Unit Price Fixed Cost of Pumpkin Sorbet: Rental PhP1,000.00 Salaries 5,000.00 Advertising 1,000.00 Depreciation Account- Freezer(Small) 13,000.00 Depreciation Account- Blender 770.00 Depreciation Account- Chairs and 1,800/set Tables Depreciation Account- Tools and 2 900.00 Utensils Utility and Sanitation 1,500.00

Quantity

Total

1 month 3 crews 1 month 1 Freezer 2 Blenders

PhP 1,000.00 15,000.00 1,000.00 1,300.00 140.00

2 sets set of tools & utensils 1 month

(A)Total Fixed Cost Variable Cost: Raw Materials: Plastic Spoons Packaging (Plastic Cups) All Purpose Cream Condensed Milk Alsa Gulaman Cassava Flour Powdered Milk Vanilla Essence Cheese Electricity Communication Bills Water Supply Transportation Miscellaneous (B) Total Variable Cost (A+B) Total Cost of Production

25.00 50.00/pack 38.50 36.50 39.50 25 41.50 14.00 23.50 1,000.00 800.00 600.00 300.00 1,500.00

66 packs 66 packs 572 tetra packs 286 cans 143 boxes 1.5 kilo 57 packs 95 bottles 95 bar 1 month 1 month 1 month 1 month 1 month

300.00 180.00 1,500.00 PhP 20,420.00

1,650.00 3,300.00 22,022.00 10,439.00 5648.50 37.50 2,365.50 1,330.00 2,232.50 800.00 600.00 400.00 250.00 500.00 PhP 51,575.00 PhP 71,995.00

Table 3 shows the variable and fixed cost in the operation of Pumpkin Sorbet. This will serve as basis for computing the breakeven point sales price and volume. Based on the total FC & VC, the business is capable of producing 286 gallons per month.

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Ice Cream Flavour

Costing

Pumpkin

C-5 M-2 SP-7

Table 4 PROJECTED REVENUE Projected Projected Volume Daily Volume (in cups) Revenue Daily Monthly 530

PhP 3,710.00

11660

Monthly Revenue

Yearly Projected Revenue

PhP 81,620.00

PhP 979,440.00

LEGEND: Cost – C Mark-up - M Sales price – SP

Revenue Cost Projected Net Profit

Table 5 MONTHLY PROJECTED COST & REVENUE Jan Feb Mar Apr 81,620.0 81,620.00 81,620.00 81,620.00 0 71,995.0 71,995.00 71,995.00 71,995.00 0 9,625.00

May

Jun

81,620.00

81,620.00

71,995.00

71,995.00

9,625.00

9,625.00

9,625.00

9,625.00

9,625.00

Dec

Total

Jul

Aug

Sep

Oct

Nov

81,620.00

81,620.00

81,620.00

81,620.00

81,620.00

71,995.00

71,995.00

71,995.00

71,995.00

71,995.00

71,995.00

PhP 863,940.00

9,625.00

9,625.00

9,625.00

9,625.00

9,625.00

9,625.00

PhP 283,500.00

81,620.00

PhP 979,440.00

Break-Even Guide Total Revenue (TR) = Fixed Cost (FC) + Variable Cost (VC) When TR is > then FC and VC means the business is earning profit. When TR is < then the FC + VC means the business is losing. When TR = then FC + VC, the business is break-even.

Table 5 shows the monthly projected cost & revenue. As shown, the business projected Php 979,440.00 gross sales for a year which is greater than the cost at Php 863,940.00. thus, a net annual profit of Php 283,500.00. This is 32.81%% of the total cost.

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Table 6 Project Cost PARTICULAR Fixed Assets

EQUITY

Equipments

PhP 6,440.00

PhP 15,000.00

PhP 21,440.00

PhP 6,440.00

PhP 15,000.00

PhP 21,440.00

PhP 3,000.00

0.00

PhP 3,000.00

PhP 30, 075.00

PhP 117,000.00

PhP 147,075.00

PhP 7,650.00

0.00

PhP 7,650.00

PhP 20,000.00 PhP 3,000.00 PhP 4,500.00

PhP 25,000.00 0.00 0.00

PhP 45,000.00 PhP 3,000.00 PhP 4,500.00

TOTAL

LOAN

TOTAL

Other Assets Rent Deposit Working Capital (3 months) Supplies and Materials Other Operational Supplies Salaries Rent Utilities

PhP 207,225.00

TOTAL Pre-Operating Expense

PhP 15,000.00

0.00

PhP 15,000.00

Grand Total (Pesos)

PhP 89,665.00

PhP157,000.00

PhP 246,665.00

36.5%

63.5%

100%

Grand Total (%)

Table 7 Loan Repayment Schedule YEAR

TOTAL AMORTIZATION

INTEREST

PRINCIPAL

BALANCE

PhP157,000.00

PhP157,000.00 0.00

0.00 0.00

0.00 0.00

0 1

PhP 180,550.00

2 3

0.00 0.00

PhP 23,550.00 0.00 0.00

**Interest at 15%

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Table 8 Pumpkin Sorbet PROJECTED INCOME STATEMENT FOR THE YEARS ENDED 2008- 2010 REVENUE Cost /Expenses Projected Net Income

2008 PhP 979,440.00 PhP 863,940.00 PhP 115,500.00

2009 PhP 1,175,328.00 PhP 1,036,728.00 PhP 138,600.00

2010 PhP1,410,393.60 PhP1,244,073.60 PhP166,320.00

Projected Income for the year is expected to by at least rise by 20% Table 9 CASH FLOW 1ST QUARTER OF 2008 Projected Cash Flow Statement Particulars Cash Inflow Cash Equity Loan Proceeds Cash Sales

Pre- OP

1

PhP 89,665.00 PhP157,000.00

Year 2

PhP 979,440.00 PhP 979,440.00

PhP1,224,300.00

PhP 157,725.00 PhP 189,205.63 -

PhP 346,930.63 PhP 1,244,659.37 PhP 1,626,174.00 PhP 2,870,833.37

PhP 246,665.00

Cash Outflow Rental Deposit Pre- Operating Expenses Purchase of F/A Assets Selling Expenses Tax Payable Loan Amortization Principal Interest

PhP 3,000.00 PhP 15,000.00 PhP 21,440.00 -

PhP 157,725.00 PhP157,000.00 PhP 23,550.00

PhP 157,725.00 PhP 157,671.00 -

PhP 39,440.00 PhP 286,105.00

PhP 338,275.00

PhP 315,396.00

PhP 431,165.00

PhP 908,904.00

-

PhP 286,105.00

PhP 717,270.00

PhP 286,105.00

PhP 717,270.00

PhP 1,626,174.00

Net Cash Inflow Add: Cash Balance, Beg. Cash Balance, Ending

PhP 1,591,590.00 PhP 1,591,590.00

PhP1,224,300.00

Total Cash Inflow

Total Cash Outflow

3

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II. Social Impact A. Long- Term Desired Outcomes Pumpkin Sorbet will supply the feeding program members in different schools near the location including Alabang Elementary School, Cupang Elementary School, Buli Elementary School and Sucat Elementary School. The proponents will also prioritize the patient in the hospital. They are currently on negotiation with the Principals of Cupang, Buli, and Alabang Elementary schools regarding the inclusion of the pumpkin sorbet in the dietary supplement among the students in the school’s feeding program. Thus, Pumpkin Sorbet expect that within three years of operation it can fund its own feeding program and an advocacy program for squash growing framers as part of their corporate social responsibility. B. Social Impact in the Community The business will not only help the malnourished children in the community but to help the producers of these goods that will be the main thrust of the business. It will implement an On-the-Job Training of the students inside the Muntinlupa Business High School as a preparation for their official training in work. The proponents of the business will also be the educator of the students taking the T.V.E.( Technical Vocational Education)- Food Processing since our school is implementing this hind of curriculum. This will be a great help for them in case they are planning to build their own business in the future. C. Business Impact in the Community Pumpkin Sorbet believes in co- existing with nature and business environment. It will increase market demand for pumpkin growers or squash farmers who produce this agricultural product. This will help the government prevent importation of pumpkins from neighbouring Asian agricultural countries. Since the main product is made from pumpkin or squash, it promotes healthy, affordable and satisfying pumpkin derivative products. The proponents made an agreement with the MBHS administration on how they can be of help on the promotion of nutrition and on increasing the agricultural market especially on “Pagkaing Sapat Program”. The business has the potential to survive in the market because of its affordability, high nutritional value and have high social desirability.

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Here is a set of criteria which will guide you in evaluating the business plan of your classmate. RUBRICS FOR BUSINESS PLAN PAPER EVALUATION Description

Rubric Rating 10 8 6 4

Executive Summary Personal Details I. Names & Brief Biography II. Name of Adviser/s & Brief Biography Overview of the Business I. Name of the Business II. Description of the Business Model III. Statement of Vision, Mission, and Values Business Plan Proper I. The Problem/Need A. Description of the exact problem/need addressed B. Reasons/rationale why the problem/ need must be addressed by the business C. Descriptions on how the business has solved the problem/need II. Statement of Vision, Mission , and Values A. Vision Description/statement of what the proponent sees if the problem/ need are solved. B. Mission Clear description of goals and objectives that present practical steps to achieve the vision. C. Clear statement of values critical to the culture, integrity and activities of the business III. The Marketing Plan A. Research & Analysis 1. Description of the Target Market 2. Market Size 3. Competition/Market Share 4. Market Trends B. Marketing Strategies 1. How the product/service be introduced in the market? 2. How will the customers be reached and served? 3. How will the investors be served? 4. Description of the business ownership, roles of the partners. 5. Value Added Features 18

6. Location of the business IV. Production and Technical Plan A. Detailed description of products/services B. Operating Strategies 1. Description/Illustration of production model 2. Detailed description of raw material, suppliers, transportation needed and how these will be accessed. 3. Details/data presented on how the Products/services will be further developed and the help needed and the agency or company who can do it. C. Critical Risks a. Data on existing competitors b. Statement on how the proposed business is different from the others c. Description/Illustration of the proposed business' competitive strategy d. Partners are identified, their roles, and added value to maximize impact. e. Detailed description of the risks and opportunities (SWOT Analysis) f. Description on how the business would capitalize to prevent the risks. V. Organizational/Management Plan A. Members of the team B. Team's contribution to the business C. Others who can be part of the team VI. Operational Plan A. Detailed description on how the business will be implemented. a. Assignment of tasks b. Schedules of deliverables c. Data of necessary resources d. Description/Illustration of operational model and work flow f. Description of business back progress and division of works g. Data on estimates of the business operations B. Monitoring and Evaluation a. Statement of outcome the business will achieve based on targets b. Descriptions/Illustrations on how you will monitor achievement c. Statement of performance targets d. Time line on when the targets will be 19

achieved Sustainability I. Financial Plan (This includes strategies for fund raising.) A. Soundness of the average investment needed B. Data/Scheduled of the specific investments needed in 1 - 2 years C. Percentage share on investments/capital of each member of the proponents D. Detailed description on how funds will be raised to start the business E. Data/Statement on how many years the business will earn profit II. Social Impact A. Statement of the business' long-term desired outcomes B. Statement of the social impact generated from each of the business activities C. Statement/data on the benefit and impact of the business to the community

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ACTIVITY: A. based on the given example of a business plan with its major components, formulate one question per component to test if a business plan meets a given standard using the rubric. B. Now after you have formulated your questions, let it be validated by your teacher which you may use in the evaluation of your classmate’s business plan. LET US REMEMBER Business Plan is a blueprint to guide your business policies, operation and strategies. It details the past, present and forecasted performance of your business. LET US APPLY WHAT YOU HAVE LEARNED Being an entrepreneur, you must have an effective business plan. You should follow the steps in preparing a business so that the data must be accurate and adequate. This will help you to choose the appropriate and effective strategies to ensure success in your business venture. ACTIVITY: Think of a simple business you want to engage in. Make a sample business plan of that business using the format below: Business Name Location Name of Owner

: : :

Introduction

: is a registered business engaged in

owned by

.

Business goals are as follows: a. The operation started on b. The location could be reached by c. The business could be expanded by

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Table of Contents Section I : The Business 1. Description of the Business The business is engaged in the distribution of or production, or of servicing customers. 2. Product/Service The product/service is 3. Market Production will be distributed in (mention primary and secondary market) The clients belong to (description of the socio-economic level). The product is bought by clients for the following reasons: 4. Location of the Business The business is located at It can easily be reached by 5. Competitors are as follows:

.

(State the name of the company and other relevant facts such as size and possible sales) A competitor’s profile includes price, quality, location, image projected, strategies of selling and operations. 6. Price The current price is _____. It is derived from the following factors: (production cost and marked up costs) . 7. Marketing strategies The product will be distributed in the following manner: 8. Management The management group is composed of the following (name, position, responsibility and qualification)

9. Personnel The personnel needed are the following (enumerate the type of work and their qualifications)

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Summary of Section One

Section II: Financial Data 1. Sources and application of funding: Secure financial assistance from For the following purposes Using the following collaterals 2. Capital Equipment List The capital and equipment lists are the following: Briefly describe the equipment and their uses. processes employed in the production)

Include

3. Balance Sheet This is a statement of the financial condition of an enterprise at a given point in time usually only a focus, quarterly, semiannually or annually. It shows the owner how money has been invested and the accrued profit or losses. 4. Break-even Analysis (It is a tool used by an entrepreneur in solving managerial problems). It compares the total resources (TR) with the total cost (TC) TR represents income while TC represents expenses of the enterprise. When TR is greater than TC, there is profit. But when TR equals TC it is break even. There is no profit, nor loss. 5. Income Projection (Profit-Loss Statement) a. Detailed by month(for the first year) b. Detailed by quarter (for the 2nd, 3rd, 4th, 5th)

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HOW MUCH HAVE YOU LEARNED? POST TEST

1.

2.

3.

4.

5.

Direction: Select the letter of the best answer and write it on your quiz notebook. Description of the target market is formed in the_________ part of the business plan. a. Marketing Plan b. Marketing Strategies c. Operating Strategies d. Production Strategies Detailed description of products or services is in what part of the business plan? a. Marketing plan b. Production and technical plan c. Operation plan d. Organization and management Which part of the business plan describes how the business has solved the problems? a. Statement of vision b. The marketing plan c. The problem need d. Production technical plan Which part of the business plan presents the data on how the products/service will be further developed. a. Financial Plan b. Marketing Plan c. Production Plan d. Operation and technical Plan What part of the business plan can present a clear statement of values critical to culture, integrity and activities of the business? a. Marketing plan b. Production plan c. Operational plan d. Statement of vision, mission and values

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RESOURCES -

learning guide business plan assessment tool

REFERENCES Adams, Bob, Small Business start – Up, Adams Media Corporation, USA 1996 Peters, Hisrich, Entrepreneurship, MgGraw Hill Book Co. Singapore 1999 Rojo, Luz V. et.al Business Management, Adriana pubishing Co. INC. Manila. 2003 Pumpkin Sorbet, Cabantog, Levy Jr., Rivamonte Gilvar, Bautista, Jayvee, A Business Plan presented to the Board of Judges, National Student Technologists and Entrepreneurs of the Philippines, Business Planning Competition 2007, Davao City, Philippines, November 21, 2007

25

KEY TO CORRECTION 1. 2. 3. 4. 5.

A B C D D

26

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, May 25 – 30, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Gilbert Camayang Cabrroguiz National School of Arts and Trade Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Mr. Fernando C. Agustin Bukig National Arts and Trade School Mrs. Leona M. Tomas San Pedro National High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

27

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, June 5 -7, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

28

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, July 1to 5, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Carolina F. Chavez, Aida T. Galuran, Beatriz A. Adriano & Dr. Corazon C. Echano Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

29

TABLE OF CONTENTS Module Title: Finalizing Evaluated Business Plan

Page

How to Use This Module . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Summary of Learning Outcome . . . . . . . . . . . . . . . . . . . . . . . . .

2

What Will You Learn What Do You Already Know Pre – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Lesson 1 : Finalizing Evaluated Business Plan. . . . . . . . . . . . . . . What is this Lesson About What Will You Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Activity Let Us Remember Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . .  Post Test

4

6

How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . . Post Test

7

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8

Key to Correction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

30

Republic of the Philippines Department of Education PUBLIC TECHNICAL -VOCATIONAL HIGH SCHOOLS

Unit of Competency

Module No. 2

Module Title

: :

Recall the Duties and Functions of Enterprise Owner Recalling the Duties and Functions of Enterprise Owner

0

HOW TO USE THIS MODULE Welcome to the Module “Recalling the Duties and Functions of Enterprise Owner”. This module contains instructional materials and activities for you to complete. The unit of competency “Recall the Duties and Functions of Enterprise Owner contains the knowledge, skills and attitudes required for the course Entrepreneurship. You are required to go through a series of learning activities in order to complete each of the learning outcomes of the module. Follow these activities on your own and answer the Self-Check at the end of each learning activity. If you have questions, don’t hesitate to ask your teacher for assistance.

1

COURSE

:

UNIT OF COMPETENCY

:

Recall the Duties and Functions of Enterprise Owner

MODULE TITLE

:

Recalling the Duties and Functions of an Enterprise Owner

MODULE DESCRIPTION

:

This module covers the knowledge, skills and attitudes required in recalling the duties and functions of an enterprise owner.

SUGGESTED DURATION

:

10 Hours

ENTREPRENEURSHIP IV

SUMMARY OF LEARNING OUTCOMES: Upon completion of the module the students should be able to: LO1 Recall the duties and functions owner.

of an enterprise

2

WHAT WILL YOU LEARN? At the end of this module, you are expected to recall the duties and functions of an enterprise owner. WHAT DO YOU ALREADY KNOW? PRE TEST Let us find out how much you already know about the duties and functions of an enterprise owner. Answer the questions below honestly. Write the letter only of your chosen answer in your activity notebook: 1. The management approach that supports the principle of putting the right person in the right job is called___________. a. behavioral approach b. contingency approach c. scientific management approach d. systems approach 2. The diagram that shows the position of a person in the company and the corresponding authorities, responsibilities and accountabilities of such position is called a ___________. a. accountability diagram b. conduct job analysis c. organizational diagram d. status symbol 3. This is one of the steps in learning your personnel requirements. a. assess the strength and weaknesses of the present employees b. conduct job analysis c. determine the workload in the company d. all of the above 4. One way to meet extreme needs is through_________. a. insurance plans b. promotion c. rest period d. water to drink 5. A grievance system is a form of which type of communication? a. Downward communication b. Upward communication c. Lateral communication d. Horizontal communication

3

6. A leadership skill that refers to the ability to grasp the relationship of different parts into an integrated whole and to analyze data is called____________. a. conceptual skill b. human relations skill c. technical skill d. all of the above 7. This type of leader leaves his subordinates alone to establish their goals and solve their problems. a. autocratic leader b. democratic leader c. people – oriented leader d. task – oriented leader 8. They represent the needs towards which all organizational efforts are directed. a. budget b. objectives c. policies d. rules 9. In Maslow’s Model of Hierarchy of Needs, the level that refers to the need to develop one’s potential and creation to the fullest is called __________. a. esteem needs b. security c. self – realization d. social needs 10. The term that refers to the evaluation of the overall performance of the firm is called______________. a. employees evaluation b. operational control c. organizational control d. qualify control

4

LESSON 1 DUTIES AND FUNCTIONS OF AN ENTERPRISE OWNER WHAT IS THIS LESSON ALL ABOUT? This lessons the recalls the duties and functions of an enterprise owner. WHAT WILL YOU LEARN? At the end of this module you shall be able to: 1.

Recall the duties and functions of an enterprise owner

LET US STUDY: WORDS TO STUDY Planning is thinking before a particular task is done. Organizing

means assembling the essential resources to execute the developed plans.

Directing

involves the guiding, leading and supervision of the employees for the achievement of organizational goals

Staffing

is the proper and effective selection, appraisal and development of personnel to do the jobs and fulfill the roles in the structure.

Controlling

means making sure that activities done in the enterprise are in conformity with what has been planned.

As you have previously learned, entrepreneurs plan and organize resources and run the business. This denotes ownership of the enterprise. Managers may or may not be necessarily the owners of the company although they run it. They can be just mere employees. The functions of management are uniquely described as manager’s job. Managerial functions are the same for all organizations

5

regardless of size or type. The only difference is the amount of emphasis given to each staffing, directing and controlling. PLANNING This is the function of management that involves setting of objectives and determining the course of action for achieving these objectives. PLANNING

(Short-range)

OPERATIONAL

(Long – range)

Environmental scanning Establishing objectives Identifying alternative courses of action Evaluating various alternatives. Making decisions about the best course of action.

STRATEGIC

(Intermediate – range)

TACTICAL

1. 2. 3. 4. 5.

ORGANIZING The task of organizing involves defining the specific activities necessary to achieve the enterprise goals, clustering the activities into departments or job positions and designating the personnel to head and compose each department. A diagram showing the organizational relationships of the position and their corresponding authority, responsibility and accountability is called the organizational chart. Authority is the right that a manager has to require a subordinate to accomplish something. Authority can be delegated. Responsibility is the duty of the manager that one has to fulfill in connection with the performance of his job. Responsibility cannot be delegated. Accountability, like responsibility cannot be delegated. This is the situation of being answerable to higher authorities.

6

TYPES OF ORGANIZATION 

Line Organization Direct command of superiors over workers who accomplish the task. The officers of the operating units receive orders from their higher authority and relay to their subordinates. Example: MANAGER

SUPERVISOR FOREMAN WORKERS 

Line and Staff The president hires to handle specialized activities which a line officer can not handle the legal counsel helps and advise the president and does not have authority over the line employee.

PRESIDENT

LEGAL OFFICER

MARKETING MANAGER

PRODUCTION OFFICER

ADMINISTRATIVE OFFICER

7

FUNCTIONAL TYPE This structure focuses on the functions or types of activities in each unit. It is expected that the worker has one or more immediate supervisor Example: MANAGER

Supervisor

Leadman

QUALITY CONTROL OFFICER

WORKERS 

PRODUCTION MANAGER

WORKERS

WORKERS

Committee Type This form of organization represents a group of persons who may fulfill functional staff or line duties, as contrasted with a one – man performer who runs the organization single – handedly. An example is an executive committee which is tasked to plan and formulate decisions in a company.

STAFFING The organizational framework needs to be flashed out by people who will man the positions.

8

FOUR ESSENTIAL STEPS

Design an Improvement Plan

Examine Present Personnel Job Analysis Workload Assessment

Recruitment Training and Development

Assessment of Workers’ skills, strengths, weaknesses, potentials Workers vs. Required Skills and Abilities

Quantity and Quality of Personnel Needed

DIRECTING

9

Directing involves putting your plans into effect. BEHAVIORAL APPROACH (Ex. Maslow’s Hierarchy of Needs)

MOTIVATION

LEADERSHIP SKILL upward

Communication

lateral

downward

CONTROLLING Making sure that what is done in the enterprise conforms with what has been planned. CHARACTERISTICS OF CONTROLLING    

Proper Activities Timely Cost – effective Accurate

Compare Performance

ACTIVITY:

Set Performance Measurement Establish Standard

Measure Actual Performance

10

Fill in the diagram with the five (5) basic functions of an enterprise owner.

1. 2. 3. 4. 5.

ENTERPRISE OWNER

LET US REMEMBER In a business enterprise, it is important to have an organizational structure because it determines the level of authority, duties and functions of each manager and worker. LET US APPLY WHAT YOU HAVE LEARNED Given your knowledge of the duties and functions of an entrepreneur, put a check mark in YES if you are appropriately doing your part as an entrepreneur. Put a cross mark X In NO if you do not do your duties functions. DUTIES AND FUNCTIONS

YES NO

1. Planning Do you have a clear plan on what is to be done, when, how and by whom it should be done? 2. Organizing Are your specific activities well defined? 3. Staffing Do you have proper and effective selection, appraisal and development of personnel to do the job? 4. Directing Can you communicate well with your clients? 5. Controlling Are you well aware of the quantity of your products or services number of customers or clients and quality of products or services? 11

HOW MUCH HAVE YOU LEARNED FROM THIS MODULE? POST TEST Multiple Choice: Direction: Answer the questions below honestly. Write the letter of the correct answer in your quiz notebook. 1. The management approach that supports the principle of putting the right person in the right job is called. e. behavioral approach f. contingency approach g. scientific management approach h. systems approach 2. The diagram that shows the position of a person in the company and the corresponding authorities responsibilities and accountabilities of such position is called a ___________. a. accountability diagram b. conduct job analysis c. organizational diagram d. status symbol

3. This is one of the steps in learning your personnel requirements. a. Assess the strength and weaknesses of the present employees b. Conduct job analysis c. Determine the workload in the company d. All of the above 4. One way to meet extreme needs id through_________. a. Insurance plans b. Promotion c. Rest period d. Water to drink 5. A grievance system is a form of which type of communication? a. downward b. upward c. lateral d. horizontal

12

6. A leadership skill that refers to the ability to grasp the relationship of different parts into an integrated whole and to analyze data is called____________. a. conceptual skill b. human relation skill c. technical skill d. all of the above 7. This type of leader leaves his subordinates alone to establish their goals and solve their problems. a. autocratic leader b. democratic leader c. people – oriented leader d. task – oriented leader 8. They represent the needs towards which all organizational efforts are directed. a. budget b. objectives c. policies d. rules 9. In Maslow’s Model of Hierarchy of Needs, the level that refers to the need to develop one’s potential and creation to the fullest is called __________. a. esteem needs b. security c. self – realization d. social needs 10. The term that refers to the evaluation of the overall performance Of the firm is called______________. e. employees evaluation f. operational control g. organizational control h. qualify control

13

RESOURCES: -

Assessment tools Learning guide Business planning

REFERENCES: -

Anderson, P. and Pulich “Managerial Competencies Necessary in Today’s Dynamic Health Care Environment. Heath Care Manager 21, no.2 (2002)

-

Carrol, Stephen J., and Dennis J. Guillen. “Are the Classical Management functions useful in Describing managerial Work?”; Academy of Management review 12 no.1 (1980:38-51)

-

SEDP Book

-

www.coolclips.com

14

KEY TO CORRECTION

1. 2. 3. 4. 5.

C C D D B

15

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, May 25 – 30, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Gilbert Camayang Cabrroguiz National School of Arts and Trade Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Mr. Fernando C. Agustin Bukig National Arts and Trade School Mrs. Leona M. Tomas San Pedro National High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

16

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, June 5 -7, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

17

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, July 1to 5, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Carolina F. Chavez, Aida T. Galuran, Beatriz A. Adriano & Dr. Corazon C. Echano Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

18

TABLE OF CONTENTS Module Title: Familiarizing Learners with the Duties and Functions of Enterprise Owner

Page

How to Use This Module . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Summary of Learning Outcome . . . . . . . . . . . . . . . . . . . . . . . . .

2

What Will You Learn What Do You Already Know Pre – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Lesson 1: Duties and Functions of an Enterprise Owner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

What is this Lesson About What Will You Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Activity Let Us Remember Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . .  Post Test

11

How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . . Post Test

12

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

Key to Correction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

19

Republic of the Philippines Department of Education PUBLIC TECHNICAL -VOCATIONAL HIGH SCHOOLS

Unit of Competency

Module No. 3

: Perform Purchasing and Inventory of Production Materials Module Title

: Performing Purchasing and Inventory of Production Materials

0

HOW TO USE THIS MODULE Welcome to the Module “: Performing Purchasing and Inventory of Production Materials”. This module contains instructional materials and activities for you to complete. The unit of competency, Perform Purchasing and Inventory of Production Materials contains the knowledge, skills and attitudes required for the course Entrepreneurship. You are required to go through a series of learning activities in order to complete each of the learning outcomes of the module. Follow these activities on your own and answer the Self-Check at the end of each learning activity. If you have questions, don’t hesitate to ask your teacher for assistance.

1

COURSE

: ENTREPRENEURSHIP IV

UNIT OF COMPETENCY

: Perform Purchasing and Inventory of Production Materials

MODULE TITLE

: Performing Purchasing and Inventory of Production Materials

MODULE DESCRIPTION

: This module covers the knowledge, skills and attitude required to perform the purchase of production materials.

SUGGESTED DURATION

: 10 Hours

SUMMARY OF LEARNING OUTCOMES: At the end of this module, you are expected to: L.O.1. identify criteria in purchasing production materials; and L.O.2. utilize standard inventory control of the production materials.

2

WHAT WILL YOU LEARN? At the end of this module, you are expected to:  learn the criteria in purchasing production materials; and  utilizing standard inventory control of the production material. WHAT DO YOU ALREADY KNOW? Directions: Let us find out how much you already know in identifying criteria in purchasing production materials and utilizing standard inventory control of the production materials. Answer the questions below honestly and write the letter of the corresponding answer in your activity notebook. 1. Apple, cucumber, carrots, tomatoes and corn are examples of what products? a. grown products b. manufactured products c. processed products 2. The dresses we have, bags we use and shoes we wear, are examples of what products? a. grown products b. manufactured products c. processed products 3. The maximized use of the natural resources, nurturing entrepreneurial skills of the Filipino people and additional income of the government through tax collection are examples of what purchasing activity? a. benefits of purchasing activity b. factors in purchasing goods and services c. guidelines in purchasing process 4. Assessing the profile of the producers and customers and checking the track record of the suppliers are examples of what purchasing activity? a. benefits of purchasing activity b. factors in purchasing goods and services c. guidelines in purchasing process 5. These are stock files of materials for the inputs of production. a. finished-goods-inventory b. raw-materials-inventory c. work-in-process inventory

3

6. These are partially completed products requiring further processing including sets of unfinished goods for production process. a. finished-goods-inventory b. raw-materials-inventory c. work-in-process inventory 7. These are the final outputs of production ready for delivery to the customers. a. finished-goods-inventory b. raw-materials-inventory c. work-in-process inventory 8. Stock card #1 has information and data that are categorized in what cluster of items? a. collective b. group c. individual 9. Stock card #2 has information and data that are categorized in what cluster of items? a. collective b. group c. individual 10. When you need to purchase or avail of goods and services without the need to leave the country, how do you classify these resources? a. export resources b. imported resources c. local resources

4

LESSON 1

IDENTIFY CRITERIA IN PURCHASING PRODUCTION MATERIALS

WHAT IS THE LESSON ABOUT? This lesson will teach you how to identify criteria in the purchase of production materials. It will guide you on how to utilize a stock card for inventory control of production materials necessary in the continuous operation of the business. WHAT WILL YOU LEARN? At the end of the lesson, you are expected to: 1. learn the benefits and factors in purchasing goods and services by using the set of criteria cited in this lesson; 2. use a stock card for the inventory control of the production materials; and 3. identify local sources necessary in the purchase of production of materials. LET US STUDY WORDS TO STUDY Sourcing is a complete process of obtaining goods and services from preparation and processing of a requisition to receipt and approval of the invoice for payment. Services are intangible products that are not goods (tangible products), such as accounting, banking, cleaning, consultancy, education, insurance, know how, medical treatment, transportation. Stockpile is a comparatively large stock of essential goods or materials, built up to withstand long holdups or scarcity due to natural calamities, strikes, or war. Inventory is an itemized catalog or list of tangible goods or property, or the intangible attributes or qualities.

5

PURCHASING OF GOODS AND SERVICES FROM THE LOCAL SOURCES We are very lucky nowadays enjoying and benefiting from the advantages that technology brings to our life. When we go to the supermarkets and department stores, lots of goods and services are there available for your needs. With various shopping malls we have in the entire Philippines, you will not think of going abroad to purchase the things that you want. As an entrepreneur, you must realize that there are things that are grown like the fruits, plants, vegetables and other natural resources. Other things made and manufactured according to the needs and wants of our target market or customers. Likewise, the services are also made and created according to the felt need of the community. Service is more delicate to manage because it is a work that someone has to provide to others with satisfaction. Why do you prefer to purchase from local sources? Purchasing local goods and services is patronizing our own products resulting to some of the following benefits:     

it stops the value of colonial mentality not only among young children; it gives additional income to the government through tax collection; it maximizes the use of our natural resources from raw materials to the finished products; it develops the skills of the Filipino people making them more innovative, creative and productive; and it gives affordable price for seasonal and quality products, fruits and vegetables.

Factors do you consider when purchasing goods and services from the local sources? Whether you sell PRODUCTS or sell SERVICES as part of your business, skillful, careful and wise purchasing is an important part of your business. It can determine whether or not you will make a profit. Here are some important points to consider when purchasing goods and services:  study the profile of the local producers  research on the daily average consumption of the customers  know your customers  find out the right place to buy  determine how much to procure  check the track record of each supplier  get the behavior of the patrons towards the products and services  ensure the sustainability of the items

6

LET US REMEMBER In the purchasing activity of the business, the supply of goods and services are vital factors to consider. Supply is the amount of something the customers can avail from the producers who make or grow goods and services. LET US APPLY WHAT YOU HAVE LEARNED Directions: Find out the available goods and services in your community and compare them with other communities using the Venn diagram in any of the following categories: 1. 2. 3. 4.

Profile of the Producers 5. Determine How Much to Procure Customer’s Average Consumption 6. Check the Track record Profile of the Customers 7. Behavior of the Patrons Right Place to Buy 8. Sustainability of the items

VENN DIAGRAM

DIFFERENCES

DIFFERENCES

SIMILARITIES

7

HOW MUCH HAVE YOU LEARNED FROM THIS LESSON? Directions: Write capital letter “B” for benefits and “F” for factors in purchasing activity. Copy and answer this evaluation activity on your quiz notebook.

CRITERIA IN PURCHASING MATERIALS

RESPONSE

1. Knowing the customers you are prospecting 2. Having more tax collections 3. Checking the profile of the suppliers 4. Becoming more productive and creative 5. Maximizing the use of the resources As a young entrepreneur, how can you show the responsible ways of purchasing activities on any of the possible situations you may consider? Write your answer on the blank sheets below. 1. ____________________________________________________________ _____________________________________________________________ 2. _____________________________________________________________ _____________________________________________________________ 3. _____________________________________________________________ _____________________________________________________________ 4. _____________________________________________________________ _____________________________________________________________ 5. _____________________________________________________________ _____________________________________________________________

8

LESSON 2

UTILIZE STANDARD INVENTORY CONTROL OF THE PRODUCTION MATERIAL

WHAT IS THIS LESSON ABOUT? This lesson deals with the inventory control of production resources. You will learn some ways on how to do the controlling function of a business to ensure enough resources in the making of goods and services. WHAT WILL YOU LEARN? At the end of the lesson you should be able to: 1. Determine the correct use of the business stock cards; 2. Conduct inventory control of the production materials for the goods and services businesses using stock card.

LET US STUDY WORDS TO STUDY Control is an approach or strategy that checks and balance resources needed in the continuous operation of the business. Inventories are stocks of goods and materials available for production or manufacturing. Process refers to the step – by - step manner of operation making product from raw materials into finished outputs. Stocks are the inventory itself in various forms.

9

CONDUCTING INVENTORY CONTROL OF GOODS AND SERVICES

One delicate task of an entrepreneur is to maintain an inventory control of goods and services. There must be an assurance that the owner will not run out of stock in the production phase of his business. These are much accounted for from raw materials to the finished expected outputs. All related activities of purchasing require control management. There must be no shortages of materials since sources and supplies are locally checked and available for the business. How do you control inventory of goods and services? It is imperative to determine your production ability, capacity and responsibility. An enterprise must have reliable data about purchasing and manufacturing. A production chart on daily, weekly, monthly, quarterly and yearly basis would help to feed information as basis of parallel consumption of the materials. The use of stock card is a good strategy to control records of stocks of goods and materials. There are three types of inventories described below: 1. Raw-Materials Inventory (RMI). These are stockpile of materials for inputs of production. (Examples are textile in roll and threads in boxes stocked in a warehouse for the garment industry.) 2. Work-In-Process Inventory (WIPI). These are partially completed products requiring further processing including sets of unfinished goods for production process. These unfinished items are for fabrication or for further processing stocked in buffer storage. (Examples are the baby dress garments with body parts only waiting for the sleeve and collar sewing operations) 3. Finished-Goods Inventory. These are the final outputs of production ready for delivery to the market or customers. (Examples are bags, shoes, t-shirts, computers, calculators, books and others.) To control is not only to check physically but to list down stocks and balances on a stock card before deciding to do the purchasing activity. It is important to declare the minimum and maximum stock of every item needed in the business operation. The important sources like the suppliers and stores (including business places) are reflected in the stock card including the date of purchase and the price as reference.

10

In this stock card, it is important to update the daily record to tally the actual stocks against what is reflected on the stock card. This would help an entrepreneur to know what, when, where and how many items are to be purchased at a time to sustain the inventory of goods and services. Every stock card must be a reliable piece of reference. All items received and used should be updated at all times. Below are examples of stock cards that you may use. Of course, you may also design your own stock card. The stock card-1 is for itemized inventory record per item or individual; while stock card – 2 is for the collective inventory record of all the files of stock card - 1.

TENEZA’S MEAT & FISH PRODUCT COMPANY

S

Stock Card No. Item: + Deliveries Date (qty./units)

C

1

TOCK ARD(Individual/Per Item) Min. Stock Max. Stock - Withdrawals BALANCE (qty./units) (qty./units)

Supplier: Re-Order Stock Withdrawn by: (Person/Department)

TENEZA’S MEAT & FISH PRODUCT COMPANY

S

C

2

TOCK ARD(Collective Items from Stock card – 1)

Month

Item

Operation Year: ________ Beginning +Total Deliveries Balance -Total Withdrawals

Cumulative Balance

11

Below is an example of a filled-up stock card,

TENEZA’S MEAT & FISH PRODUCT COMPANY

S Stock Card No. 1 Item: TVP/Textured Vegetable Protein

Date

+ Deliveries (qty./units)

C

TOCK ARD(Individual/Per Item)

Min. Stock:

3 bags

Max. Stock: 25 bags Withdrawals (qty./units)

Balance Forwarded 2009 May 25 5 bags 26 8 27 4 20 bags (OR#1221, P750/bag) 28 29 5 June 2 16 20 bags (OR#1221, P750/bag) 3 4 1 10 2 11 2 12 2 13 1 14 1 15 1 16 17 18 19 20

BALANCE (qty./units)

1 Supplier: MVC Company Re-Order Stock: 20 bags Withdrawn by: (Person/Department)

20 bags

Ms. Sol Saldivar

15 7 3 23 18 2 22 21 19 17 15 14 13 12

Mr. Rene Delfino Jun (Mixing Section) Reynaldo (Receiving Sec) Leony (MVC Co.) Perchy (DepEd) Marian (Packaging Dept) Leony (MVC CO.) Jenny (Shipping Dept.) Via (Manufacturing Dept) Jun (Mixing Section) Reynaldo (Receiving Sec) Via (Manufacturing Dept) Reynaldo (Receiving Sec) Jun (Mixing Section)

LET US REMEMBER In the successful inventory control management, always remember to take note of the date, items received and withdrawn, supplier sources, minimum and maximum stocks, re-order stock, the price and other data important in the inventory control. The stock card should always be maintained as a tool or basis to control inventory.

12

LET US APPLY WHAT YOU HAVE LEARNED Directions: Following the Stock Card No. 1 (above) for Textured Vegetable Protein of Teneza’s Meat & Fish Product Company, assume business operation and consider your own business reflecting data on the appropriate columns available. Copy the stock card on your activity notebook and use it on your business now.

Name of your business: ________________________________________

S

Stock Card No. Item: + Deliveries Date (qty./units) Balance Forwarded

C

1

TOCK ARD(Individual/Per Item) Min. Stock: Max. Stock: - Withdrawals BALANCE (qty./units) (qty./units)

Supplier: Re-Order Stock: Withdrawn by: (Person/Department)

HOW MUCH HAVE YOU LEARNED FROM THIS LESSON Directions: Choose the correct answers from the ITEM BANK below and write your answers on your quiz notebook. ITEM BANK Finished-Goods Inventory Inventory of Goods and Services Inventory of Services Raw-Materials Inventory Work-In-Process Inventory

Stock Card – 1 Stock Card – 2 Stock Card - 3 Stock Card - 3 Stock Card – 3

1. These are stockpile of materials for inputs of production. 2. These are partially completed products requiring further processing including sets of unfinished goods for production process. 3. These are the final outputs of production ready for delivery to the market or customers. 4. This is the stock card for the collective items of stocks. 5. It is an inventory tool designed for individual item of stocks.

13

POST-TEST

Directions: Let us find out how much you already know about production cost and pricing of products or services. Answer the questions below honestly and write the letter of the corresponding answer in your activity notebook. 1. Things or products like apple, cucumber, carrots, tomatoes and corn are examples of what products? a. grown products b. manufactured products c. processed products 2. The dresses we have, bags we use and shoes we wear, are examples of what products? a. grown products b. manufactured products c. processed products 3. Maximized use of the natural resources, nurturing entrepreneurial skills of the Filipino people and additional income of the government through tax collection are examples of what in purchasing activity? a. benefits of purchasing activity b. factors in purchasing goods and services c. guidelines in purchasing process 4. Assessing the profile of the producers and customers and checking the track record of the suppliers are examples of what in purchasing activity? a. benefits of purchasing activity b. factors in purchasing goods and services c. guidelines in purchasing process 5. These are stock files of materials for the inputs of production. a. finished-goods-inventory b. raw-materials-inventory c. work-in-process inventory 6. These are partially completed products requiring further processing including sets of unfinished goods for production process. a. finished-goods-inventory b. raw-materials-inventory c. work-in-process inventory

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7. These are the final outputs of production ready for delivery to the customers. a. finished-goods-inventory b. raw-materials-inventory c. work-in-process inventory 8. Stock card #1 has information and data that are categorized in what cluster of items? a. collective b. group c. individual 9. Stock card #2 has information and data that are categorized in what cluster of items? a. collective b. group c. individual 10. When you need to purchase or avail of goods and services without the need to leave the country, how do you classify these resources? a. export resources b. imported resources c. local resources

15

RESOURCES: Individual Stock Card for Inventory Purpose Stock Card for the Collective Items REFERENCES: Fajardo, Feliciano R., Entrepreneurship Jorge A. Camposano, Jorge A., MBA, Ph.D., Entrepreneurship for Modern Business San Gabriel, Nati C., Business Finance and Business Firms SEDP, Business Management Teneza, Celedonia T., Ed.D., Worktext in Technology & Livelihood Education in Business Management III, published by Shekinah Publishing and Printing Press Co., Copyright, 2006 Teneza, Celedonia T., Ed.D., & Baes, Ma. Gradiva S., Worktext in Technology & Livelihood Education in Business Management IV, published by Shekinah Publishing and Printing Press Co., Copyright, 2006 Villanueva, Cristina R. & Rojo, Luz V., Technology & Livelihood Education Internet Sources: www.wikipedia.com www.econolib.org www.brittanica.com

16

MODULE 3 Engaging in the Purchase of Goods and Services PRE-TEST/POST-TEST

KEY TO CORRECTION

1. A 2. B 3. A 4. B 5. B 6. C 7. A 8. C 9. A 10. C

17

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, May 25 – 30, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Gilbert Camayang Cabrroguiz National School of Arts and Trade Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Mr. Fernando C. Agustin Bukig National Arts and Trade School Mrs. Leona M. Tomas San Pedro National High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

18

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, June 5 7, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

19

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, July 1to 5, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School

Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Carolina F. Chavez, Aida T. Galuran, Beatriz A. Adriano & Dr. Corazon C. Echano Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

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TABLE OF CONTENTS Module Title: Determining Production Cost Page and Price of Products and Service How to Use This Module . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Summary of Learning Outcome . . . . . . . . . . . . . . . . . . . . . . . . .

2

What Will You Learn What Do You Already Know Pre – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Lesson 1: Identify Criteria in Purchasing Production Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 What is this Lesson About What Will You Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Let Us Remember Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . .

7

How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . .

8

Lesson 2: Utilize Standard Inventory Control of the Production Materials . . . . . . . . . . . . . . . . . . . . 9 Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Let Us Remember . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . . .

13

How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

Post – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

Key to Correction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

21

Republic of the Philippines Department of Education PUBLIC TECHNICAL –VOCATIONALHIGH SCHOOLS

Unit of Competency

Module No. 4

Module Title

: Determine Costing and Pricing of Products and Services : Determining Costing and Pricing of Products and Services

0

HOW TO USE THIS MODULE Welcome to the Module “Determining Costing and Pricing of Products and Services”. This module contains instructional materials and activities for you to complete. The unit of competency “Determine Costing and Pricing of Products and Services” contains the knowledge, skills and attitudes required for the course Entrepreneurship. You are required to go through a series of learning activities in order to complete each of the learning outcomes of the module. Follow these activities on your own and answer the Self-Check at the end of each learning activity. If you have questions, don’t hesitate to ask your teacher for assistance.

1

COURSE

:

ENTREPRENEURSHIP IV

UNIT OF COMPETENCY

:

Determine Costing and Pricing of Products and Services

MODULE TITLE

:

Determining Costing and Pricing of Products and Services

MODULE DESCRIPTION

:

This module covers the knowledge, skills and attitude required in determining cost and price of products or services of the business.

ESTIMATED DURATION

:

10 Hours

SUMMARY OF LEARNING OUTCOMES: At the end of this module, you are expected to: L.O.1. estimate cost of products and services; and L.O.2. determine pricing of products and services using pricing model.

2

WHAT WILL YOU LEARN? This module will teach you how to estimate cost of products and services. You will learn how to determine price of products and services using pricing model.

WHAT DO YOU ALREADY KNOW?

Directions: Let us find out how much you already know about production cost and pricing of products or services. Answer the questions below honestly and write the letter and the corresponding answer in your activity notebook. 1. What is the business condition when the Total Revenue (TR) is greater than Total Cost (TC)? a. There is a business loss b. There is a profit c. There is no gain and no loss 2. In a laundry shop, when do you give a discount of 10% a. 5 to 12 kilos of laundry b. 10 to 13 kilos of laundry c. 13 kilos of laundry and above 3. It refers to the value set for rendering a service or product for sale or the amount paid for commodities. a. cost b. price c. profit 4. How much is the price of a bottle of perfume when the cost is P250.00 with 38% Target Profit in Percent (TPP). a. P299.00 b. P345.00 c. P380.00 5.

A method of setting a price according to the values of the products or services offered to the clients that usually increases when there are evident results. a. cost-plus-pricing method b. return on investment pricing c. value-based pricing

3

6. This describes a method of setting up price to target profit from specific product or service. a. cost-plus-pricing method b. return on investment pricing c. value-based pricing 7. Price is only one factor in purchasing which may lead to the most risky activity in pricing. This is called _________________________. a. highest price strategy b. lowest price strategy c. moderate price strategy 8. What type of costing is direct labor and raw material in production? a. direct cost b. indirect cost c. purchasing cost 9. Expenses on building, machines, maintenance, salaries, office costs, selling and financial costs are better known as overhead expenses. Which of the following costing does it fall? a. direct cost b. indirect cost c. purchasing cost 10. It refers to the margin or difference between the cost price and the selling price of an item. a. mark-up b. revenues c. sales profit

4

LESSON 1

ESTIMATE COST OF PRODUCTS AND SERVICES

WHAT IS THIS LESSON ABOUT? This lesson will teach you how to estimate costs of products and services. You will learn how to analyze and compute accurately for the production cost of your own business venture. WHAT WILL YOU LEARN? At the end of the module you should be able to: 1. Apply the rules of production in your enterprise; and 2. Compute the cost and price of the product or service of your chosen business. LET US STUDY WORDS TO STUDY Capital Cost - a payment of interest for the duration of the loan Cost - represents form of payment Direct Cost - payment and expenditure made for the production or service that become part of the product like acquisition of raw materials and salaries/wages of the workers Indirect Cost - sum of other expenses or cost generated from the business and also known as overhead expenses Material Cost - all materials needed both for direct manufacturing and those needed for the functioning of the business Production - process of making or manufacturing goods Staff Cost - are salaries or wages plus additional costs as payments or incentive on overtime works, social security, annual and sick leaves of workers.

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APPLYING THE RULES OF PRODUCTION TO AN ENTERPRISE The rules of production describe the behavior of the business condition in the aspect of profit, loss, payment and production. Total Revenue or TR represents income; while Total Cost or TC reveals expenses. How will you know when to produce more? When to stop producing? When to maintain production? Each situation below follows a decision. Remember what to do in the following instances: 1. What will be your decision, when the TR (INCOME) of your business is equal to TC (EXPENSES)? EXAMPLE: TR = TC 2,000 = 2000 DECISION: There is a need to maintain your production. 2. What will you do when the TR of your enterprise is less than to the TC? EXAMPLE: TR = TC 5,000 = 8,000 DECISION: The production needs to stop. 3. What action do you need to take if you have greater TR than your TC? EXAMPLE: TR = TC 10,000 = 7,000 DECISION: You have to produce more COMPUTING THE COST OF THE PRODUCT OR SERVICE OF YOUR CHOSEN BUSINESS The cost of the product or service is done on estimate approach. It is vital to list down and determine the costing to make a product or to deliver a service. It does not matter how big or small your business is. What is important is to know and estimate the cost of your production or service delivery. There are factors that cause successful industries to fail because they are not aware of their costs.

6

What are the benefits if you know your costs? Look at the chart below and find out how helpful it is to know the cost of your business: 1 2 3 4 5

You You You You You

can can can can can

PRODUCTION COSTS BENEFITS CHECKLIST draft your estimates without worries. anticipate for estimated profits. identify the expensive and cheap materials you need. have a chance to do the cost-cutting. sense the improvements of your business.

Now that you know the importance of the production cost, how will you compute for your costs? Here is how to do it: 1. List down your needed raw materials 2. Determine the other raw materials you need in the operation of your business and services 3. Specify your estimate for the needed manpower 4. Come up with the facilities and machineries required in the operation of your chosen business. 5. Survey on the quality but cheapest source of materials you need. After completing your list, estimate for the DIRECT COST and INDIRECT COST your business is facing. These are the two types of costs. The direct cost refers to the item which becomes part of the products or services composing material cost, wages and benefits. The indirect costs are referring to those items needed in running a business and are better known as overhead expenses. These are the expenses on building, machines, maintenance, salaries, office costs, selling cost and financial cost. DIRECT COST COMPUTATION Description Estimated Cost Monthly Wage and Allowance for 4 4 workers x P5,000.00 + workers receiving Php5,000.00 & 1 1 supervisor x P10,000.00 Supervisor receiving Php10,000.00 =P30,000.00/monthly Yearly Wage and Allowance for P30,000.00 x 12 months 4 workers and 1 supervisor =P360,000.00/yearly Calculation for the Total Number of 47 weeks x 40 hours/week x 4 Hours spent by the workers in a year workers = 7,520 Hours Hourly Labor Cost = Total Yearly P360, 000.00/7,520 Hrs. Wage Bill/total number of hours =P47.87/Hour worked in a year Hours needed to complete a wood bench (it takes only 2 workers, each 4.0 x 2 consuming 4.7 to do it): Labor time = 8 Hours taken x no. of workers = total no. of hours Direct Labor Cost of the wood bench: 8.0 Hrs x P47.87/Hour No. of Hours x Hourly labor rate = =P382.96 Total labor cost per wood bench =considered – P380.00

7

To compute for the direct material cost for one wood bench, include the cost of all other materials and parts in manufacturing as shown in the table below. BILL of MATERIALS of 1 WOODEN BENCH Quantity

Description

Total Board Feet (bdft)

Price/ Bdft

Unit Cost

Total Cost

P29.00

P87.00

P87.00

1 pc.

2”x2”x8’ (leg)

3

4 pcs.

1”x3”x10’ (frame)

2.5

72.50

290.00

1 pc.

1.5”x2”x6’ (brace)

1.5

43.50

43.50

4 btls

Plastic varnish

120.00

½ kl.

2” finishing nails

50.00

25.00

1 btl

wood glue

65.0

65.00

4 pcs

sand paper

15.00

60.00

1pc

2” paint brush

49.50

49.50

DIRECT MATERIAL COST PER BENCH

480.00

P1,100.00

NAILING BOARD=1.2 ft. SHORT FRAME=1.2 ft. SEAT TOP BOARD=5 ft.

LONG FRAME=5 ft. LEG=1.5ft .

BRACE= 1.2 ft.

LEG=1.5ft.

Can you compute now for the total direct costs of the bench? Get the sum of the total direct labor, costs per wood bench, total direct material and costs per wood bench. Analyze the computation below: Total direct labor Costs per wooden bench Add: Total direct material Costs per bench TOTAL DIRECT COST PER BENCH

P380.00 1,100.00 P1,480.0

8

The entrepreneur has many other expenses compared to the direct cost. The following is an example of how to estimate or compute for the indirect cost: A. INDIRECT COST COMPUTATION Interest on loan P10,000.00 Insurance of machines/stocks 5,000.00 Maintenance of machines 20,000.00 Power and electricity 24,000.00 Rent of building 25,000.00 Salaries/Wages 60,000.00 Selling cost (transportation/representation) 20,000.00 Telephone 5,000.00 TOTAL INDIRECT COST+20 percent P169,000.00 of 169,000.00 for taxes, etc. + 33,800.00 TOTAL INDIRECT COSTS FOR THE YEAR P202,800.00 If one product is developed by an entrepreneur for the computation of the indirect cost, the indirect cost is simply the indirect costs divided by the calculated number of wood benches to be manufactured during the year. Let us say that the entrepreneur targets for 1,500 wood benches: P202,800.00 = P135.20 1,500 Computation for the total costs: Total direct costs per bench Add: Total indirect costs per bench TOTAL COST PER BENCH

P380.00 135.20 P515.20

The entrepreneur’s computation of the wood bench is based on 1,500 sales units for a year. If there will be no increase in indirect costs, then the indirect cost will be: P772, 800 = P 515.20 1,500 The total cost of the bench now becomes: Direct cost per bench Add: Indirect cost per bench TOTAL COST PER BENCH

P380.00 515.20 P895.20

9

LET US REMEMBER The rules of production are helpful to the entrepreneurs. These will guide him to know what and how to decide on his production. It tells when they need to produce more, when to stop production or when to maintain the production. Likewise, it is good for all the business enterprises to know the computation of their production to avoid failure of business operations. LET US APPLY WHAT YOU HAVE LEARNED A. Given the following nominal values of revenues and costs, decide whether you need to produce more, stop your production or maintain production of goods or services. Draw an upward (↑) arrow if your answer is to produce more; downward arrow (↓) when you need to stop and draw a smiley face (☺) when your decision is to maintain production. NO. 1 2 3 4 5

BUSINESS NAME Son’s Academy Sea-Bricks Co. Jay’s Fashion Shop Jr/Sr Internet Café Celjun’s Transpo

TR (INCOME) 18,000 24,500 15,880 6,800 22,100

TC (EXPENSES) 21,000 19,000 15,880 8,300 15,500

ENTREPRENEUR’S DECISION

B. Compute for the cost and analyze the following problems. Write your answers inside the box. Show the solution in a separate sheet to arrive at the correct answers. 1. If you have two (2) workers receiving each a daily wage of P250.00 a day, with 5 working days a week, how much is your total wage bill for a month? ANSWER/SOLUTION: ______________________________ 2. Based on your answer in number 1, how much is your annual wage cost of production? ANSWER/SOLUTION: _________________________ 3. How much will be your total direct costs per bench if the total direct labor is P200.00 and the total direct material is 450? ANSWER/SOLUTION: ____________________________________________ 4. What is 25% of the assumed P150, 000.00 indirect costs? ANSWER/SOLUTION: ____________________________________________ 5. As an entrepreneur, what will you expect for a cost of a unit of wood bench when you target for 2,000 unit yearly sales with P225, 000.00 total indirect costs for the year? ANSWER/SOLUTION: ___________________________________________________________________

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HOW MUCH HAVE YOU LEARNED FROM THIS LESSON?

Directions: Copy the letter of the correct answer on your quiz notebook.

1. This is the a. b. c.

time when you need to decide to maintain your production. When the TR is equal to TC When the TR is greater than TC When the TR is lesser than TC

2. It refers to the situation when you need to decide to produce more when the _________. a. TR is equal to TC b. TR is greater than TC c. TR is lesser than TC 3. Time may come when you really need to decide to stop your business production. When the ___________. a. TR is equal to TC b. TR is greater than TC c. TR is lesser than TC 4. It is the way you calculate or estimate the cost to have for a product. a. costing b. pricing c. producing 5. The direct labor cost and direct raw material costs are under which type of production cost? a. direct cost b. indirect cost c. purchasing cost

A. Write on the worksheet below at least 5 particulars of the direct and indirect costs of any service type or production business. DIRECT COST 1. 2. 3. 4. 5.

INDIRECT COST 1. 2. 3. 4. 5.

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LESS0N 2

DETERMINE PRICING OF PRODUCTS AND SERVICES USING PRICING MODEL

WHAT IS THE LESSON ABOUT? In this lesson, you will appreciate how to decide for the market price of your products or services and choose your own pricing strategy. WHAT WILL YOU LEARN? At the end of the module you should be able to: 1. Come up with a pattern of computation to price your own products or services; and 2. Compute for the price of your own business products or services. LET US STUDY WORDS TO STUDY Mark-up represents the difference between what is paid for the merchandise and its end price to the clients Pattern refers to an outline or model of one thing Price indicates value of a commodity or service in the form of money Product the result of the input and process in the form of output Services is a type of business that has no product but purely services Strategy is an approach or method used in business Pricing strategy is a part of the pricing system wherein the government becomes alert against those who are abusing and making unreasonable prices. Keeping an enterprise pattern when it comes to pricing of commodities and services, serve as guide for the entrepreneurs to understand how their prices are computed objectively. However, lowest price approach is the most risky activity in pricing and it should be avoided. 12

The key secret of the business firms to compete for the price is through the various pricing strategies. Giving focus on the competition for cleanliness, convenience, delivery, easy credit options, guarantees, quality, safety and service are only secondary concerns. As a young entrepreneur, what is your idea about the different pricing strategies? You may consider one of the following pricing strategies if you still do not have your own strategy:  Value-based pricing (price increases when there are evident results)  Posting P9.95 instead of P10; P24.50 instead of P25.00; and others  Value pack (mixture of clustered products with varied prices in one pack or bag)  Cost-plus-pricing method (setting up price targeting specific profit)  High Price Approach aiming to set quality and status. It is also called as prestige strategy  Penetration market is common to the new entrepreneurs. They are doing it in order to establish market and build up more customers.  Free tasting (Sampling Approach)  Result pay scheme (Trial Method) Before you do the final pricing, you have to know the value of the total revenues (TR) and the total costs (TC). When TR is greater than TC, your business gained profit. If the TR is lesser than TC, it is loss. In instances that the TR and TC are equal, there is neither profit nor loss. It is called break-even. Break even analysis is used as an instrument or a tool to solve managerial problems helpful among business leaders and economists. Here are some models in pricing goods and services. These will help you to know how you can compute prices of your own product and service business. Find out if this pricing scheme is appropriate to use in the production of your business: 1. Percentage Allocation Approach (PAA). This is good for product business. Decide for the percentage value to be added to the actual cost of your product or service. Below are examples: A. Unit Cost of Product (UCP), TVE T-Shirt = P55.00 Target Profit in Percent (TPP) =40% COMPUTATION = UCP + TPP = P55.00 x .40 = P22.00 = P55.00 + P22.00 UNIT PRICE = P77.00 B. Volume Cost of Product (VCP), TVE T-Shirt by Volume Target Profit (VTP) per dozen of Quantity (Q): 1 to 5 dozens = 38% 6 to 10 dozens = 35% 11 to 15 dozens = 32% 16 dozens & above = 30% 13

COMPUTATION

for 1 to 5 dozens (maximum based) of TVE T-Shirts:

VCP = UCP + VTP x Quantity (Q) = P55.00 + 38% x 60 = P55.00 + 20.90 x 60 = P75.90 x 60 VOLUME PRICE = P4, 554.00 UNIT PRICE = P75.90 COMPUTATION for 5 to 10 dozens (maximum based) of TVE T-Shirts: VCP = UCP + VTP x Quantity (Q) = P55.00 + 35% x 120 = P55.00 + 19.25 x 120 = P74.25 x 120 VOLUME PRICE = P8, 910.00 UNIT PRICE = P74.25 2. Average Mark-up Approach (AMA). This is appropriate to the service type of business. Mark-up consists of damaged merchandise, employee discounts, markdowns, operating expenses, profits and shortages. This is common in industries but differ in the way they execute it supported by company rules and policies. Here is how to compute for the pricing of a service type of business. a. Assume that you are operating a laundry service business b. Decide for 60% profit against actual cost of every laundry service, where 20% intends to support and finance some operating expenses like damaged merchandise, employee discounts, markdowns, operating expenses, profits and shortages. c. Consider a 40% mark-up to be added to the cost of the service Price of laundry service per kilo: Cost of laundry = P20.00 General Markup = 60% *40% Target Profit (TP); 20% Operating Expenses (OE) PRICE

= = = =

Cost of laundry + TP + OE P20.00 + 40% + 20% P20.00 + P8.00 + P4.00 P32.00

When you compute for 5 to 10 kilos (maximum based) of laundry service, rendered to a single client, you may charge her/him with a friendly discount of 5% from the total charge. When you do it, it will not bring any business loss to you but an investment of a good reputation and goodwill.

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Let us find out how much you will sacrifice to invest for a possible goodwill using the data above: Unit price per laundry service P32.00 x 10 kilos -5% discount/10 = P32.00x10-5% /10 = P320.00-P16.00/10 = P30.40 Therefore, goodwill investment capital for 10 kilos of laundry service is only P1.60 (P32.00 unit price less P30.40 discounted price) per kilo of laundry service rendered to your customer. It is suggested that the following goodwill investment package chart be applied on your laundry business. You may also change it for further improvement of your services: a) 100% service fee of P32.00 per kilo of laundry b) 5% discount from 5 to 12 kilos of laundry c) 10% discount from 13 kilos and above of laundry LET US REMEMBER As a future entrepreneur, you have to value the importance of honest and accurate computation in pricing. Pricing policy will help every entrepreneur. The use of models or standard samples of computation will facilitate the correct pricing procedure. LET US APPLY WHAT YOU HAVE LEARNED 1. Assuming that you need to supply a school canteen of bottled mineral water, 500 ml with a cost of P6.50/bottle, how do you determine the price per bottle? Please explain your answer below by showing the computation. COMPUTATION:

15

2. If you will compute for the service of a doctor’s professional fee of P380.00 per consultation (inclusive of the clinic rental, bills, etc.) how much will the doctor’s consultation service be? Discuss your answer below by showing the computation for 60% general mark-up. COMPUTATION:

HOW MUCH HAVE YOU LEARNED FROM THIS LESSON? Directions: Copy the letter of the correct answer in your quiz notebook. 1. If you have 10 jackets for P180.00 unit cost, how much will be the unit price at 40% Target Profit in Percent (TPP)? a. P272.00 b. P295.00 c. P252.00 2. Compute how much will be the price of a bottle of perfume when the cost is P250.00 with 38%TPP? a. P380.00 b. P299.00 c. P345.00 3. With 10% discount incentive, what will be the unit price of 10 kilos laundry if the service is P32 per kilo? a. P320.00 b. P232.00 c. P288.00 4. In a laundry shop, when do you give a discount of 10% a. 5 to 12 kilos of laundry b. 10 to 13 kilos of laundry c. 14 to 15 kilos of laundry 5. What is the effect in business when the TR is lesser than the TC? a. There is a business loss b. There is a profit c. There is no gain and no loss

16

POST-TEST Directions: Let us find out how much you have learned about production cost and pricing of products or services. Answer the questions below honestly and write the letter and the word of your answer in your activity notebook. 1.

What is a. b. c.

the business condition when the TR is greater than TC? There is a business loss There is a profit There is no gain and no loss

2. In a laundry shop, when do you give a discount of 10%? a. 5 to 12 kilos of laundry b. 10 to 13 kilos of laundry c. 13 kilos of laundry and above 3. It refers to the value sets for rendering a service or product for sale or the amount paid for commodities. a. cost b. price c. profit 4. How much is the price of a bottle of perfume when the cost is P250.00 with 38%TPP. a. P380.00 b. P299.00 c. P345.00 5. A method of setting a price according to the values of the products or services offered to the clients that usually increases when there are evident results. a. cost-plus-pricing method b. return on investment pricing c. value-based pricing 6. This describes a method of setting up price to target specific profit from specific product or service. a. cost-plus-pricing method b. return on investment pricing c. value-based pricing 7. Price is only one factor in purchasing which may lead to the most risky activity in pricing. This is called _________________. a. highest price strategy b. lowest price strategy c. moderate price strategy

17

8. What type of costing is the direct labor cost and raw material in production ? a. direct cost b. indirect cost c. purchasing cost 9. Expenses on building, machines, maintenance, salaries, office costs, selling cost and financial costs are better known as overhead expenses. Which of the following costing does it fall? a. direct cost b. indirect cost c. purchasing cost 10. It refers to the margin or difference between the cost price and the selling price of an item. a. mark-up b. revenues c. sales profit

18

RESOURCES: Models in Pricing Goods and Services Rules of Production Chart Production Cost Benefits Checklist

REFERENCES: Fajardo, Feliciano R., Entrepreneurship

Jorge A. Camposano, Jorge A., MBA, Ph.D., Entrepreneurship for Modern Business

San Gabriel, Nati C., Business Finance and Business Firms

SEDP, Business Management

Teneza, Celedonia T., Ed.D., Worktext in Technology & Livelihood Education in Business Management III, published by Shekinah Publishing and Printing Press Co., Copyright, 2006

Teneza, Celedonia T., Ed.D., & Baes, Ma. Gradiva S., Worktext in Technology & Livelihood Education in Business Management IV, published by Shekinah Publishing and Printing Press Co., Copyright, 2006

Villanueva, Cristina R. & Rojo, Luz V., Technology & Livelihood Education

Internet Sources: www.wikipedia.com www.econolib.org www.brittanica.com

19

MODULE 4 Determining Production Cost and Price of Products and Services PRE-TEST/POST-TEST

KEY TO CORRECTION

1. B 2. C 3. B 4. C 5. C 6. A 7. B 8. A 9. B 10. A

20

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, May 25 – 30, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez

Jones Rural School Group Leader Dr. Celedonia T. Teneza

Benigno Aquino High School Mr. Gilbert Camayang Cabrroguiz National School of Arts and Trade

Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School

Mr. Fernando C. Agustin Bukig National Arts and Trade School Mrs. Leona M. Tomas San Pedro National High School

Facilitator: Mr.Rene Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

21

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, June 5 -7, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez

Jones Rural School Group Leader Dr. Celedonia T. Teneza

Benigno Aquino High School Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School

Facilitator: Mr.Rene Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

22

ACKNOWLEDGMENT Copyright Department of Education 2009

This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, July 1to 5, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez

Jones Rural School Group Leader

Dr. Celedonia T. Teneza

Benigno Aquino High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School

Editor: Carolina F. Chavez, Aida T. Galuran, Beatriz A. Adriano & Dr. Corazon C. Echano Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

23

TABLE OF CONTENTS

Module Title: Determining Production Cost and Price of Products and Service

Page

How to Use This Module . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Summary of Learning Outcome . . . . . . . . . . . . . . . . . . . . . . . . .

2

What Will You Learn What Do You Already Know Pre – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Lesson 1: Estimate Cost of Products and Services. . . . . . . . . . . . . .5 What is this Lesson About . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 What Will You Learn .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5

Let Us Remember Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . .

9

How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . 10 Lesson 2: Determine Pricing of Products and Services Using Pricing Model. . . . . . . . . . . . . . . . . . . . . . . . . .12 Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

Let Us Remember . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . . .

15

How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . . .

16

Post – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

Key to Correction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20

Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

24

Republic of the Philippines Department of Education PUBLIC TECHNICAL -VOCATIONAL HIGH SCHOOLS

Unit of Competency

Module No. 5

Module Title

:

Conduct Product or Service Trial Run

:

Conducting Product or Service Trial Run

0

HOW TO USE THIS MODULE Welcome to the Module “Conducting Product or Service Trial Run”. This module contains instructional materials and activities for you to complete. The unit of competency “Conduct Product or Service Trial Run” contains the knowledge, skills and attitudes required for the course Entrepreneurship. You are required to go through a series of learning activities in order to complete the learning outcomes of the module. Follow these activities on your own and answer the Self-Check at the end of each learning activity. If you have questions, don’t hesitate to ask your teacher for assistance.

1

COURSE

:

ENTREPRENEURSHIP IV

UNIT OF COMPETENCY

:

Conduct Product or Service Trial Run

MODULE TITLE

:

Conducting Product or Service Trial Run

MODULE DESCRIPTION

:

This module contains information and suggested learning activities on conducting product or service trial run.

SUGGESTED DURATION

:

10 Hours

SUMMARY OF LEARNING OUTCOME: Upon completion of the module the students should be able to: LO1. Conduct Product or Service Trial-Run

2

WHAT WILL YOU LEARN? At the end of this module, you are expected to come up with your own Business Trial Run Design (BUTRUD) and conduct a product or a service trial-run for your business. WHAT DO YOU ALREADY KNOW? Think of the necessary ideas for a Business Trial Run Design (BUTRUD) for the given products below based on the strategies like price flexibility, advertisement and promotions, target market and business locations. Write down appropriate ideas for these products. PRE-TEST Directions: Below is a Business Training Run Design for product and service type of business. Choose at least one from the given matrix and fill-up the needed information. Assume a business name of yours and design for your BUTRUD up to Advertisement and Promotion Scheme.

Business Trial Run Design (BUTRUD)

PRODUCTS /SERVICES

PERFUME

DETERGENT

PARLOR

Business Name Business Owner Business Location Target/Goals Timetable Price Flexibility

Market/ Clients Advertisement & Promotions

Note: You may replace the given products of your interest. Use a test notebook for this activity.

3

LESSON I

Conduct a Product or Service Trial Run WHAT IS THIS LESSON ABOUT? This lesson deals with the development of a Business Trial Run Design (BUTRUD) based on the viability of the business you may want to engage in. You will also learn how to use the BUTRUD and run a trial for your own product or service. WHAT WILL YOU LEARN? At the end of this lesson, you are expected to: 1. Come up with your own Business Trial Run Design (BUTRUD) suited for your business whether product or service type; and 2. Use your own BUTRUD in preparation of the actual selling of your business.

LET US STUDY WORDS TO STUDY Inputs Output Process Production Plan

Projected Sales Sales Management Trial – Run Viability

are the materials needed for processing to come up with finished products means finished product is the Step – by – step procedure followed in transforming materials into finished products. involves the necessary raw materials and parts, number of workers, types of machines needed, and the completion time for such operation involved. are the expected results of variable cost and fixed cost within the target period. involves formulation of sales strategy. is the actual testing of a business. means the practicability of the business.

4

BUSINESS TRIAL RUN DESIGN (BUTRUD) FOR PRODUCT and SERVICE TYPE OF BUSINESS Before engaging into any actual business like selling a product/s which you are to manufacture or produce, the essential thing to do first is to design a Business Trial Run Design (BUTRUD). This will serve you as a guide on how to decide from time to time to come up with a better business management be it manufacturing or rendering services. Below are examples of a trial run matrix for a service type of business which may help you in developing your own BUTRUD. You may also adopt it if you feel the appropriateness in your business. The trial run sample as follows is a service type of business which is a jeep transportation routing from FTI via C5 to Guadalupe: BUSINESS TRIAL RUN DESIGN (BUTRUD) SERVICE TYPE OF BUSINESS Business Name TENEZA’S TRANSPO COMPANY Business MAJ. JOVITO B. TENEZA SR. Owner Business BLK.4,LOT 25,PHASE 2,AFP/PNP VILLAGE, PHASE Location 2, WESTERN BICUTAN, TAGUIG CITY  To receive a flat rate minimum boundary of P600 & P500 only for the 1st trial week run.  To have a maximum boundary of P900 & P700 Target Goals from the 2 units of jeeps after a week, except (except coding) weekends & holidays for P800 & P600 only.  To save 10% from the daily boundary for maintenance purposes after a week of trial Timetable ONE WEEK ONLY Price Flexibility  Minimum Fare - Php 7.00 (Fare Scheme)  Maximum Fare – Php 18.00  All purposive trips through regular listing from the jeep terminal (Housing or Guadalupe)  Playing a beautiful sound. Advertisement  Could consider all rides under minimum fares & Promotion only for the 1st week of trip.  After a week of advertisement, passengers will be charged under normal fare matrix. Target  Regular passengers/commuters (students, Market workers, etc.) from any port of the FTI via C5 to Guadalupe.  Rental from a group of people for the team building of the school, company or students.

5

Having your trial run is a great advantage because this gives you important information about the progress of your business in all aspects of venturing. Below is another BUTRUD for the product type of business. Remember to give emphasis on the timetable of your trial before the actual management of your venture. Here is a sample trial run matrix of a product type of business about ICE CREAM. This ice cream is a combination of the seasoned fruits and vegetables. You may call it as a “Frut-Veg Ice Cream for All Seasons”. BUSINESS TRIAL RUN DESIGN (BUTRUD) PRODUCT TYPE OF BUSINESS Business Name Business Owner Business Location

Target Goals

Timetable Price Flexibility Advertisement & Promotion Target Market

FRUT-VEG ICE CREAM for ALL SEASONS DR. CELEDONIA T. TENEZA LOT 10, BLK 136, LOPEZ JAENA ST., BRGY. RIZAL, MAKATI CITY  To earn income of P3,000.00 in a week  To double the income for the succeeding weeks after the trial run  To have an upward sales from week 1 onward  To save at least 10% of the daily income for revolving fund after the trial week ONE WEEK ONLY  Minimum Price – Php12.00/cup size  Maximum Price – Php 299.00/gallon  Free for the 1st 5 buyers per cup size  50% discount for the next 5 buyers per cup size  25% discount for the 1st 5 buyers per gallon  25% discount for the next 5 buyers per gallon  Community neighborhood;  Students in the nearby elementary, high schools & universities;  Buyers/walkers in the markets/supermarkets.

LET US REMEMBER In venturing a business, it is important that the enterprise owner is well versed with the Business Trial Run Design (BUTRUD). This would help him to improve the business operations that may result for better products or services. The BUTRUD serves as a tool to check and balance the management of one business to ensure a good income.

6

LET US APPLY WHAT YOU HAVE LEARNED Try to arrange the words from the Item Bank and locate it properly to the second column by writing the appropriate words that describe the items/words in the first column.

ITEM BANK Business Name

Service type of business

Product type of business

Price Flexibility

Business Location

Advertisement/Promotion

Timetable

Target Goals

Market/Clients

Business Owner

Items on the first column of the chart below describe some part of the structure of a Business Trial Run Design introduced to you in this lesson. Analyze what is being described and write your answer on the column opposite of each item.

1. Buy free for the 1st 5 clients 2. One week trial run 3. To save 10% from income after a week of trial run 4. Students from elementary, high school and universities 5. Frut-Veg Ice Cream for All Seasons

7

HOW MUCH HAVE YOU LEARNED? POST-TEST Directions: Below is a Business Training Run Design for product and service type of business. Choose at least one from the given matrix and fill-up the needed information. Assume a business name of yours and design for your BUTRUD up to Advertisement and Promotion Scheme.

Business Trial Run Design (BUTRUD)

PRODUCTS /SERVICES

PERFUME

DETERGENT

PARLOR

Business Name Business Owner Business Location Target/Goals Timetable Price Flexibility

Market/ Clients Advertisement & Promotions

8

RESOURCES: -

pencil handouts writing materials

REFERENCES: Almonte, Crispina B. et.al., Learning from Small Business, Anvil Publishing Inc. 2007 Cuyugan, Jorge H., A Business Planning Manual Ditablan, eustaquio, Feasibility Study Handbook Mullins, John N., The New Business Road Test Prentice Hall., Great Britain. 2003 Manu, George et. al., How to Elaorate One’s Own Business. International Training Center of the ILO, 2005 Internet Source: www.agripinoy.net/making

9

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, May 25 – 30, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Gilbert Camayang Cabrroguiz National School of Arts and Trade Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Mr. Fernando C. Agustin Bukig National Arts and Trade School Mrs. Leona M. Tomas San Pedro National High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

10

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, June 5 -7, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

11

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, July 1to 5, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Carolina F. Chavez, Aida T. Galuran, Beatriz A. Adriano & Dr. Corazon C. Echano Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

12

TABLE OF CONTENTS Module Title: Conducting Product or Service Trial Run

Page

How to Use This Module . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Summary of Learning Outcome . . . . . . . . . . . . . . . . . . . . . . . . .

2

What Will You Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 What Do You Already Know . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Pre–Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Lesson 1: Conduct Product or Service Trial Run . . . . . . . . . . . . 4 What is this Lesson About . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 What Will You Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Let Us Remember . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . . 7 How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Post – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

13

Republic of the Philippines Department of Education PUBLIC TECHNICAL -VOCATIONAL HIGH SCHOOLS

Unit of Competency

Module No. 6

: Module Title

:

Perform Actual Selling of Products or Services Performing Actual Selling of Products or Services

0

HOW TO USE THIS MODULE Welcome to the Module “Performing and Selling of Products or Services”. This module contains training materials and activities for you to complete. The unit of competency “Perform Managerial Functions” contains the knowledge, skills and attitudes required for the course Entrepreneurship. You are required to go through a series of learning activities in order to complete each of the learning outcomes of the module. Follow these activities on your own and answer the Self-Check at the end of each learning activity. If you have questions, don’t hesitate to ask your teacher for assistance.

1

COURSE

:

ENTREPRENEURSHIP IV

UNIT OF COMPETENCY

:

Perform Actual Selling of Products or Services

MODULE TITLE

:

Performing and Selling of Products or Services

MODULE DESCRIPTION

:

This lesson deals with the actual selling of products or services.

SUGGESTED DURATION

:

10 Hours

SUMMARY OF LEARNING OUTCOME Upon completion of the module the students should be able to: LO1 Perform actual selling of products or services.

2

WHAT WILL YOU LEARN? At the end of this lesson you are expected to efficiently sell your product or service.

WHAT DO YOU ALREADY KNOW? PRE TEST Let us find out how much have you already know about actual selling of products or services. Complete the statements below honestly. Write the words on the blank provided to complete the statement. Choose the answer from inside the box. Selling

price Personal selling

Selling techniques

selling terms cold calling

____________________ 1. A seller’s attempt to persuade a buyer to make a purchase. ____________________ 2. Last step in the chain of commerce where a buyer exchanges cash for seller’s goods or service. ____________________ 3. Market value or agreed exchange value that will purchase a definite quantity weight or other measure of goods or service. _____________________4. Length of time a seller allows a buyer to pay for the goods or services sold on credit. ____________________ 5. The process of approaching prospective customers or clients who were not expecting such an interaction. ___________________ 6. Body of methods used in the profession of sales.

3

LESSON 2 ACTUAL SELLING OF PRODUCT OR SERVICE WHAT IS THIS LESSON ABOUT? This lesson deals with the actual selling and application of sales management strategies to your business. WHAT WILL YOU LEARN? At the end of this lesson you should be able to: 1. Do the actual selling of your enterprise be it a product or a service. 2. Apply sales management strategies. LET US STUDY WORDS TO STUDY Selling

is the last step in the chain of commerce where a buyer exchanges cash for a seller’s goods or services.

Personal Selling

is a seller’s attempt to persuade a buyer to make a purchase.

Selling Terms

is the length of time a seller allows a buyer to pay for the goods or services sold on credit.

Price value

is the market value, or agreed exchange that will purchase a definite quantity, weight or other measure of goods or services.

Selling Techniques

is the process of approaching prospective customers or clients who were not expecting such an interaction.

Most successful entrepreneurs believe that there are ideal techniques in actual selling. However, based on the experiences of successful entrepreneurs our module offers some selling strategies

4

which might be useful for your enterprise. A good seller is good in asking questions to determine the customer’s needs and desires. This knowledge will help you gain customers who will be willing to pay for your product or service. On the other hand, you should be much more knowledgeable about their product or service, then the prospects. You must also offer valuable information and in sight to the decision making process of your client. SELLING STRATEGIES 1. Cold Calling customers or interaction.

- the process of approaching prospective clients who were not expecting such an

2. Consultative Selling – emphasize customers’ needs and meeting those needs with solutions combining products or services. 3. Direct Selling – face to face presentation, demonstration and sale of products or services, usually at the home or office of a prospect by the independent direct seller. 4. Persuasive Selling – It calls for the ability of the seller to persuade his buyer according to the compelling reasons why the buyers need to buy your enterprise. To gain success in selling, the following steps may be followed

SUCCESS Build Long – Term Relationship Closing Handling Objections Presentation o Stimulus response o Formula selling o Canned o Needs satisfaction Prospecting o Referrals o Qualifying

SELLING 5

Steps You May Follow in Selling 1. Prospecting – You can get prospects from a number of sources. oftentimes, referral from existing customers is the best way. What you only need to do is ask. On the other hand, qualifying prospects is an activity where you are trying to determine whether you are likely to buy. The importance of this is based on the premise that not all prospects meet the criteria to buy. 2. Sales Presentation – It is the time when you are presenting your product or service to your customers with the objective to stimulate further their interest. Oftentimes, this activity begins with open - ended questions. It helps you discover what your customers want and need. There are at least four types of presentation. One is stimulus –response where you try to offer the necessary information (stimulus) at the right time to make your clients buy (response). Secondly, formula selling is more thorough in providing your product information. The advantage of this is that it reduces the risk of loosing important information. Thirdly, canned presentation is presenting what you have memorized or just doing it by reading. Finally, need presentation involves asking questions and listening to customers answers to identify their needs and desires. 3. Handling questions – Usually, prospects are objecting based on costs, benefits or both. They also do it because they do not see the necessity to buy. Others do the objection because they want the deal to be more beneficial for them. In this step you need to be patient and demonstrate interest in you clients’ need. 4. Closing – This is one of the important steps because in this stage you will ask your clients orders and secure their commitment to purchase. Oftentimes, you will be the one to initiate the closing. 5. Build Long –Term Relationships – Let it not be said that the closing is not the end of selling but the beginning of your long term relations with the customers. It involves follow - up sales to see to it that they are satisfied with your enterprise. William A. O’Connell came up with a conclusion in his research that conducting the follow – ups is necessary to obtain repeat sales from existing customers. It also costs about half the amount needed to close a sale with a new customer.

6

ACTIVITY Let us now consider the following steps in selling. This activity aims to show your capability in actual selling by sharing your views on given situations. 1. If your sari – sari store is in the slum area what selling strategy would you employ? Explain why? _______________________________________________________________ _______________________________________________________________ _______________________________________________________________ ______________________________________________________________. 2. In your proposed Business, a. List down at least five possible prospects where number one is your major prospect and number five is your least prospect. You may choose from the box below or you may write your own. relatives

church mates neighbors

1. 2. 3. 4. 5.

schoolmates friends

__________________________ __________________________ __________________________ __________________________ __________________________

b. Considering your list of prospects, explain why each one is in their respective rank?

LET US REMEMBER Selling is believed to be an art of persuasion. There are suggested steps where you can go through to sell your product or service successfully.

7

LET US APPLY WHAT YOU HAVE LEARNED Using the knowledge and insights you have learned from this lesson, do an ACTUAL SELLING of your product or service this week– end (Saturday/Sunday). Prepare a report on the actual selling done for presentation and submission. Use the table below as part of your report. No. of Prospects Approached

No. of Prospects Who Purchased Your Products/Services

No. of Products Sold/ Service Secured

Below is a Reflection Chart which will determine whether you will continue or not as an entrepreneur. Rank yourself accordingly from scale of 1 to 5 where 1 has a value of 2 points, 2=4, 3=6, 4=8 and 5=10 points. If you get a total of 6 and above, then, you are a promising entrepreneur. Finally, state your reasons why you want to continue as an entrepreneur or not. You may share your experience. REFLECTION CHART OF THE WOULD-BE ENTREPRENEUR 1 2 3 4 5 1. 2. 3. 4.

I am a risk taker. I can easily decide for others. I easily get mad at problems. I feel irritated if I failed to meet my expectations. 5. I am glad to meet people.

( ) I want to continue to become a successful entrepreneur because ____________________________________________________________________. ( ) I do not want to continue as an entrepreneur because ____________________________________________________________________. HOW MUCH HAVE YOU LEARNED? POST TEST Referring to the given strategies in selling, which one would you employ as best suited for your Business Plan? Why? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

8

RESOURCES: Resources depend upon the project plan made by students based on their business enterprise. REFERENCES: -

Almonte, Crispina B. et.al. Learningfrom small business. Anvil Publishing Inc. 2007 Mullins, John W. The new Business Road Test, Prentice Hall, Great Britain 2003 Manu, George et.al. How to Elaborate One’s Own business. International Training Center of the ILO, 2005 O’Connell, William A. “The Shapes of Things to Come” Sales and Marketing Management, January 1990 pp 36 - 41 www.agripinoy.net/making-hollow-blocks-from-farmwaste.html

9

Module 6 Perform Actual Selling of Products or Services

KEY TO CORRECTION PRE-TEST/POST-TEST

1. 2. 3. 4. 5. 6.

Personal Selling Selling Price Selling terms Cold Calling Selling Techniques

10

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, May 25 – 30, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Gilbert Camayang Cabrroguiz National School of Arts and Trade Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Mr. Fernando C. Agustin Bukig National Arts and Trade School Mrs. Leona M. Tomas San Pedro National High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

11

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, June 5 -7, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

12

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, July 1to 5, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Carolina F. Chavez, Aida T. Galuran, Beatriz A. Adriano & Dr. Corazon C. Echano Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

13

TABLE OF CONTENTS Module Title: Performing Actual Selling of Products Or Services

Page

How to use this module . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Summary of Learning Outcome . . . . . . . . . . . . . . . . . . . . . . . . .

2

What Will You Learn What Do You Already Know Pre – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Lesson 1: Actual Selling of Products or Service . . . . . . . . . . . . .

4

What is this Lesson About What Will You Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-7  Selling strategies  Steps You May Follow in Selling Let Us Remember . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . .  Post Test

8

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

Key to Correction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11

14

Republic of the Philippines Department of Education PUBLIC TECHNICAL -VOCATIONAL HIGH SCHOOLS

Unit of Competency

Module No. 7

: Module Title :

Prepare and Maintain Financial Records and Reports Preparing and Maintaining Financial Records and Reports

0

HOW TO USE THIS MODULE Welcome to the Module “Preparing and Maintaining Financial Records and Reports”. This module contains training materials and activities for you to complete. The unit of competency “Prepare and Maintain Financial Record and Reports” contains the knowledge, skills and attitudes required for the course Entrepreneurship. You are required to go through a series of learning activities in order to complete each of the learning outcomes of the module. Follow these activities on your own and answer the Self-Check at the end of each learning activity. If you have questions, don‟t hesitate to ask your teacher for assistance.

1

COURSE

:

ENTREPRENEURSHIP IV

UNIT OF COMPETENCY

:

Prepare and Maintain Financial Records and Reports

MODULE TITLE

:

Preparing and Maintaining Financial Records and Reports

MODULE DESCRIPTION

:

This module covers the knowledge, skills and attitude required in preparing and maintaining financial records and reports.

SUGGESTED DURATION

:

10 Hours

SUMMARY OF LEARNING OUTCOME: Upon completion of the module the students should be able to: LO1. Prepare and maintain financial records and reports.

2

WHAT WILL YOU LEARN? 1. Differentiate accounting from bookkeeping. 2. Appreciate the importance of record keeping to the business. 3. Understand the rules of debit and credit. 4. Prepare financial statement of the business. WHAT DO YOU ALREADY KNOW? PRE - TEST A. MULTIPLE CHOICE: Direction: Answer the questions honestly. Write the letter of your choice in your quiz notebook. 1. It is a. b. c. d.

known as the language of business. Accounting Bookkeeping Transaction Posting

2. It refers to recording business and event in a systematic and chronological manner. a. Bookkeeping b. Accounting c. Transaction d. Liability 3. It is written on the left side of an account journal a. debit b. credit c. profit d. sales 4. It refers to the financial position of the business that shows the assets, liabilities, and owners‟ equity. a. financial statement b. balance sheet c. income statement d. jounalization 5. It is a report that summarizes the revenue items, expenses and profit/loss for the period. a. expense b. deprecation c. income statement d. balance sheet

3

6. It refers to the things of value owned by a business. a. capital b. inventory c. cash d. asset 7. It is the amount of merchandise sold and valued at selling price. a. sales b. receivables c. purchase d. proprietorship 8. It refers to the amount to be collected or received from a debtor in the future or at a later date. a. receivables b. net profit c. gross profit d. expenses 9. It consists of cash and other assets, that in the normal operations are expected to be converted into cash. a. fixed assets b. current assets c. other assets d. all of the above 10. It is the expense balance computed from the analysis of cash payment and comparative balance sheet data. a. Depreciation b. Expenses items c. Revenue items d. All of the above

4

LESSON 1 Prepare and Maintain Financial Records and Reports WHAT IS THIS LESSON ABOUT? An entrepreneur‟s growing concern is to continuously learn and understand the activities of his or her business. The cash movement, if properly recorded and kept, can clearly describe the total business picture. Bookkeeping can guide you in your tasks. The primary rule is to understand the mechanics of financial records. WHAT WILL YOU LEARN? At the end of the lesson you should be able to: 1. Prepare and maintain financial records and reports. LET US STUDY WORDS TO STUDY Assets are things of value owned by the business Receivables

are summarized accounts maintained with debtors and creditors.

Capital

is an excess of assets over liabilities

Balance Sheet

is the formal statement of the financial position of the business that shows the assets, liabilities and owner‟s equity.

Income statement is a report that summarizes the revenue items, expense and the difference between, which is called net profit/loss for the period.

 



ACCOUNTING The language of business The art of recording, classifying, summarizing in a significant manner and in terms of money, those transactions and events which are part, at least of a financial character and interpreted as the results thereof. BOOKKEEPING The act of recording business and events in systematic and chronological manner. The person involved in this task is the bookkeeper. His main job is to record and process data in the accounting system 5

Using the example on the below, let us illustrate the „Dual Aspect Convention of Bookkeeping: Let us assume that the material is Php.1,000.00 per kilo and Php.50.00 per meter so that with these values, you can now sum up in monetary terms that you bought goods amounting to Php. 13,850.00 (13 kilos X Php.1,000.00 plus 17 meters X Php 50.00. It is clear therefore, that the common basis for every bookkeeping record is the monetary value.

The “Dual Aspect” Convention The convention is in fact at the very heart of a bookkeeping system. Bert brings a kilo of chicken to the market and in exchange he buys T-shirt from Rene. Each of the parties in the transaction „received‟ a certain economic value and „gave‟ an identical value.

Bert „received‟ T-shirt and “Gave” a kilo of chicken

Rene „received‟ a kilo of chicken and “Gave” T-shirt

After the previous example let us assume that Bert buys a t-shirt from Rene for Php.130.00. We can see here that although we are concerned with a single commercial transaction (from Bert‟s point of view – buying chicken for cash, from Rene‟s point of view – selling chicken for cash.) We are still left with the „dual aspect.‟ Bert „received‟ goods (T-shirt) and „Gave‟ money.

Rene „received‟ money and „Gave‟ goods (T-shirt)

In other words, the language of bookkeeping tends to record a single transaction in dual manner. One, what the person „received‟ and the second, what that same person „gave‟. In bookkeeping, each single commercial Debit and Credit Rule transaction is recorded twice. On the „received‟ side and then again on the „Gave‟ side. Debit is on the left side of an account journal. Credit is the right side of an account journal.

6

1.

Type of Account Personal

2.

Real

3.

Profit and Loss

1.1 2.1 3.1 4.1 5.1

To Debit the Account

To Credit the Account

When the person in whose name the account is kept is in debt to us. When the account received money or equivalent Any account that ends with the words “Expense Accounts”

When the person in whose name the account is kept is in credit with us. When the account gives us money equivalent. Any account that ends with the words „Revenue Account”.

COMPREHENSIVE EXAMPLE We bought goods from GMC Grocery for an overall sum of Php.100.00 (invoice no.123) We sold part of the goods for Php.600.00 cash (receipt no.1950). We paid Php.200.00 cash for electricity expenses (expense voucher no.001) We bought a stone from Rene for Php.20,000.00 (invoice no.953) We rented the store out for Php.700.00 cash invoice no. 001

In the first part of the solution, the records will be presented in the form of a “T Account” and they will be presented textually in the second part. T Accounts Good Accounts Debit Credit (1) 1,000 600 (2)

GMC Grocery Debit Credit 1,000 (1)

Cash Accounts Debit Credit (2) 600 200 (3) (5) 700

Electricity Expenses Debit Credit (3) 20

Stone Accounts Debit Credit (4) 20,000

Rene Accounts Debit Credit 20,000 (4)

7

(1) (2)

(3)

(4) (5)

Textual Records (Journal Entries) Debit Debit: Goods Account 1,000 Credit: GMC Grocery Account 1.1 Purchase on credit invoice 123 Debit: Cash Account 600 Credit: Goods Account 2.1 Cash Sales Receipt invoice no.123 Debit: Electricity Expenses 200 Credit: Cash 3.1 Cash Payment, expense voucher 001 Debit: Stone Account 20,000 Credit: Rene Account 4.1 Purchase of Stone Account 953 Debit: Cash 700 Credit: Income from Rental 5.1 Cash rental account TOTAL: Php. 22,500

Credit 1,000 600

200

20,000 700 22,500

Event 1 The goods account ( a real account) is debited. An account was received (no.1 in the table) The GMC Grocery Account (a personal account) is credited to receive money (No. 2 in the table)

 

Event 2 The cash Account (a real Account) is debited – cash was received. No.2 in the table The goods account (a real account) is credited – the store issue goods (no. 2 in the table)

 

Event 3 

The electricity expenses (a profit and loss account) is debited – every expense account is debited (no. 3 in the table)

8

Event 4  

The store account (a real account) is debited. The transaction received a monetary value (No. 2 in the table). The Rene account (a personal account) is credited – according to no.1 and 2.

Event 5  

The income from the mental account ( profit and loss account) is credited – all receipts are a credit (No.3 in the table) The cash account is debited – (No. 2 in the table)

 It is easy to remember that every expense account is debited (the expense is a negative matter from an economic point of view and it is a debt of the business).  Similarly, all receipts are a credit (a credit is something positive from an economic point of view and it is to the credit of the business. Journalizing Case Problem CNSAT CATERING SERVICES Gundaway, Cobarroquis, Quirino

Business Transaction Date: 2008 August 1

Cash Investment amounting toReceived Group Amounting toInvestment Canteen – equipmentPaid Permit and License Purchase Merchandise Php.25,000.00

Php.10,000.00 Php.25,000.00 Php.15,000.00 Php.500.00 And paid

Php150.00 Transportation only 90% of the amount purchased was paid in cash Purchased liquefied petroleum (LPG) for Php.350.00

9

August 2-6

: Sold cooked food and merchandise for Php.30,000.00 only 95% was collected in cash.

August 7

: Purchased merchandise for Php.20, 000.00 in cash and paid Php.100.00 for transportation.

August 8 – 15 : Sold merchandise for Php.25,000.00 in cash offered snacks to visitors amounting to Php.200.00 and recorded it as sales. Collected Php.1500.00 of account receivables. Paid account amounting to Php.2,000.00. Paid salaries and wage manager/cashier and sales ladies Php.8,000.00 An inventory merchandise amounted to Php.13,000.00 August 16 - 30 : Purchase liquefied petroleum amounting to Php.350.00. Sold Merchandise for Php.50.000.00 only 95% were collected in cash. Purchase raw food and merchandise Php.40,000.00 and paid Php.200.00 transportation. Only 0% of the amount purchased were paid in cash. August 31

: Received electric and water bills for the month amounting to Php.1,200.00 Sold cooked food and merchandise for Php.10,500.00 in cash Collected accounts receivables amounting to Php.2,000.00. Paid trade account amounting to Php.3,500.00. Paid salaries of manager/cashier and sales lady Php8,000.00 Bought calculator Php.1,000.00 recorded as canteen equipment. Snacks offered to visitors was charged to capital account. Received building rental Php1,500.00 Depreciation of canteen equipment Php.250.00 was recognized Inventory of Merchandise and raw food were value Php.19,345. PREPARATION OF FINANCIAL STATEMENTS

FINANCIAL STATEMENTS   

Balance Sheet Income Statement Statement of Cash Receipt and Disbursement

10

    

BALANCE SHEET ACCOUNTS Cash reported in the balance shows in your cash book, with the total cash on hand and the bank deposits Receivables or payables – are summarized from the accounts maintained with debtors and creditors. Merchandise and supplies inventory – are determined by having physical count. Capital is simply the excess of assets over liabilities Assets – are things of value owned by a business o Assets are normally classified as current, fixed and other assets. 

  

Current assets – those consists of cash and other assets that in normal operation one expects to be converted into cash or consumed during the normal operations. Fixed assets – are assets that are required for long term use in the business. Other assets – those include patents, goodwill etc., which do not come within the above definitions Owner‟s equity – refers to the interest of up – owner or proprietors in the assets of a business. INCOME STATEMENT

 Sales – the amount to be reported for sales consist of the total of your cash sales on the account.

11

 Cost of Goods Sold – the inventory balance shown on in the balance sheet is reported in the profit and loss statement and is listed at the beginning of inventory.  Expense Items – an expense balance computed from the analysis of cash payment and comparative balance sheet data.  Revenue items – a revenue balance computed from the analysis of cash receipts ad comparative balance sheet.  Depreciation – the charge for the depreciation account, to be recognized in the profit and loss statement, required a special analysis of balance sheets as well as cash data.

LET US REMEMBER:   

The law requires that some forms of records must be kept by all businesses. In the time of keen competition, rising cost and increasing taxes, there can be no alternative to record keeping. There must be complete accounting of all business transactions to efficiently handle purchases and sales inventory control credit and collection, depreciation and other expenses.

Activity 1 Direction: Classify the following as: A – assets, L – Liabilities, C – Capital, R – Revenue, and E – Expenses.

12

Accounts 1. G.M. Capital 2. Land 3. Cash 4. Building 5. Accounts receivables 6. Delivery truck 7. Service Income 8. Sales 9. Prepaid Insurance 10. Accounts Payable

Classification

Activity 2 Direction: Prepare a cash flow statement and income statement of school canteen business for the period August 1-31, 2008. Refer to the business transactions given below. BISCUCHO SANTINO Cash Flow Statement For the Period _____________ August 1-15

August 16-31

CASH FLOW Cash investment Cash Grants Cash Sales Collection of Receivables TOTAL CASH FLOWS LESS: Cash Outflows Cash Purchases Freight in Permit & License Electricity Wages Salary LPG fuel Rental Payment of Payables TOTAL CASH OUTFLOWS Net Cash Indlows (Outflows) Add: Cash balance beg. Cash Balance Ending BISCUCHO SANTINO Income Statement For the Period _____________ Sales 13

Less Cost of Goods Sold Raw Food and Merchandise Invent. (Beg.) Add: Purchases Transportation Wages LPG Total Less: Raw Food & Mdse. Invent. (End) Cost of Goods Sold Gross Profit Less: Operating Expenses Electricity/Water Permit/License Salary Rental Depreciation Total Operating Expenses Net Income for the Period

Add business forms and receipts LET US APPLY WHAT YOU HAVE LEARNED:

14

It is always important to update and keep financial records and reports. On your own perception express your point of view on the importance of updating and maintaining financial records and reports by completing the open sentences below:

1. If a business has clear and accurate financial records, I ____________________________________________________________ ____________________________________________________________ ___________________________________________________________. 2. Many successful business undertakings happened because ____________________________________________________________ ____________________________________________________________ ___________________________________________________________. 3. If I want to check and see how my business works, I usually ____________________________________________________________ ____________________________________________________________ ___________________________________________________________. HOW MUCH HAVE YOU LEARNED FROM THIS MODULE? POST TEST B. MULTIPLE CHOICE: Direction: Answer the questions honestly. Write the letter of your choice in your notebook. 1. It is known as the language of business. a. Accounting b. Bookkeeping c. Transaction d. Posting 2. It refers to recording business and events in systematic and chronological manner. a. Bookkeeping b. Accounting c. Transaction d. Liability 3. It is on the left side of an accounting journal. a. debit b. credit c. profit d. sales

15

4. It refers to the financial position of the business that shows the assets, liabilities, and owner‟s equity. a. financial statement b. balance sheet c. income statement d. journalizing 5. It is a report that summarizes the revenue items, expenses and profit/loss for the period. a. expense b. deprecation c. income statement d. balance sheet 6. It refers to the things of value owned by a business. a. capital b. inventory c. cash d. asset 7. It is the amount of merchandise sold and valued at selling price. a. sales b. receivables c. purchase d. proprietorship 8. It refers to the amount to be collected or received from a debtor in the future or at a later date. a. receivables b. net profit c. gross profit d. expenses 9. It consists of cash and other assets, that in the normal operations are expected to be converted into cash. a. fixed assets b. current assets c. other assets d. all of the above 10. It is an expense balance computed from the analysis of cash payment and comparative balance sheet data. e. Depreciation f. Expenses balance g. Revenue balance h. All of the above

16

RESOURCES: -

pencil calculator handouts writing materials

REFERENCES: - Camposano, Jorge A. Entrepreneurship for Modern Business Philippines, Copyright 2006 - Technology and Home Economics II SEDP Textbook First Edition 1991 - Saguinsin, Artemio T. Bookkeeping for beginners with Taxation Law, Philippine Copyright 2006 - Feliciano Fajardo R. Entrepreneurship, Copyright 1994 - Pamphlets from DTI on Bookkeeping

17

ANSWER KEY A. MULTIPLE CHOICE 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

A A A B C D A A B B

B. CLASSIFICATION 1. C 2. A 3. A 4. A 5. A 6. A 7. C 8. A/E 9. E 10. L

18

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, May 25 – 30, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Gilbert Camayang Cabrroguiz National School of Arts and Trade Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Mr. Fernando C. Agustin Bukig National Arts and Trade School Mrs. Leona M. Tomas San Pedro National High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

19

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, June 5 -7, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

20

ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, July 1to 5, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Carolina F. Chavez, Aida T. Galuran, Beatriz A. Adriano & Dr. Corazon C. Echano Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

21

TABLE OF CONTENTS Module Title: Preparing and Maintaining Financial Records and Reports

Page

How to Use This Module . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

Summary of Learning Outcome . . . . . . . . . . . . . . . . . . . . . . . . .

2

What Will You Learn What Do You Already Know Pre – Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Lesson 1 : Different types of Financial Records and Reports . . . . . . . . . . . . . . . . . . . . . . .

5

What is this Lesson About What Will You Learn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Let Us Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

Activity 1 Activity 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

Let Us Remember Let Us Apply What You Have Learned . . . . . . . . . . . . . . . . . . . .

15

How Much Have You Learned . . . . . . . . . . . . . . . . . . . . . . . . . . Post Test

16

Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18

Key to Correction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19

Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

22

Republic of the Philippines Department of Education PUBLIC TECHNICAL -VOCATIONAL HIGH SCHOOLS

Unit of Competency

Module No. 8

:

Monitor and Evaluate Business Operations Module Title:

Monitoring and Evaluating Business Operations

1

TABLE OF CONTENTS Course Outline ......................................................................................1 Lesson 1 ................................................................................................2 Let Us Study .........................................................................................6 Information Sheet 1 ................................................................................7 Information Sheet 2 ..............................................................................10 Information Sheet 3 ..............................................................................12 Assignment 1 .......................................................................................13 Information Sheet 4 ..............................................................................14 Information Sheet 5 ..............................................................................16 Activity 2 ..............................................................................................17 Information Sheet 6 ..............................................................................18 Activity 3 ..............................................................................................19 Information Sheet 7 ..............................................................................20 Information Sheet 8 ..............................................................................21 Let Us Remember ................................................................................37 How Much Have You Learned ...............................................................38 Reference ............................................................................................41 Key to Correction .................................................................................42

2

HOW TO USE THIS MODULE Course Unit of Competency Module Title

ENTREPRENEURSHIP IV Monitor and Evaluate Business Operations Monitoring and Evaluating Business Operations

Welcome to the Module “Monitoring and Evaluating Business Operations”. This module contains information, worksheets, assignment and activity sheets for you to complete. The unit of competency “Monitor and Evaluate Business Operations” includes the knowledge, skills and attitudes required to complete module. You are required to go through a series of learning activities in order to complete the learning outcome of the module. Follow these activities on your own and answer the Self-Check at the end of each learning activity. If you have questions, do not hesitate to ask your teacher for assistance. INTRODUCTION This module contains information and suggested learning activities used in assessing business operations. In business operations, assessment is very important. It consists of finance and accounting, internal auditing, buying of materials, supplies, and equipment; facilities and risks management and other activities needed to complete the cycle. As a student entrepreneur, it is necessary that you are familiar with all the records used in the operations such financial records and reports. You will need this in gauging whether the business is earning or not. This module consists of three learning outcomes, each learning outcome contains learning activities with instruction sheets. Before following the instructions, read the information sheets and answer the self-check activities provided so that your teacher will be able to assess your competence. He/she will check if you have acquired the knowledge necessary to perform the skills portion of the particular learning outcome. Upon completing this module, report to your teacher for assessment. 1

LESSON 1 MONITOR AND EVALUATE BUSINESS OPERATIONS

WHAT IS THE LESSON ABOUT? This lesson focuses on monitoring and evaluating business operations. You will be guided on how to use tools and methods for supervising/monitoring and evaluating business operations. When you are already familiar with the tools and methods, the last part of your lesson will be on reporting results of monitoring and evaluation you conducted. WHAT WILL YOU LEARN? At the end of this module, you are expected to: 1. identify the different tools used in monitoring and evaluating business operations; 2. apply methods in monitoring and evaluating business operations; 3. prepare written and oral report based on the results of the monitoring and evaluation conducted. WHAT DO YOU ALREADY KNOW? DIRECTION: To assess how much you learned from the previous lesson try to answer the questions below. This will help you recall the things you learned about business planning and preparing financial records in business operations. 1. In any business, which of the following statements applies to purchase and sales receipts? a. Purchase receipts show what you have ordered from others while sales receipts show the value of goods received from others. b. Purchase receipts show what you have purchased form others and sales receipts show what others have purchased from you. c. Purchase receipts show the items that others have purchased from you and sales receipts show what you have purchased from others.

2

2.

3.

4.

5.

6.

d. Purchase receipts show what others have ordered from you and sales receipts show the value of the goods you purchased from others. Which of the following statements best explains the most important reason why businesses use checking accounts? a. to gain tremendous prestige for entrepreneurs b. to secure interest on the balance in the account c. to provide a good record of payments d. to enhance the quality of correspondence Choose one of the following statements to indicate how the inventory card is related to the purchase receipt and the sales receipt. a. Many of the purchase receipts would involve adding inventory; sales receipts would be subtractions from inventory. b. Many of the purchase receipts would involve subtracting from inventory; sales receipts would be additions to inventory. c. Both the purchase and sales receipts would involve adding to inventory because they represent the same transaction. d. Both the purchase and sales receipts would involve subtracting from inventory because they represent the same transaction. The difference between the accounts receivable and accounts payable cards can best be explained by which of the following statements? a. Accounts receivable show your cash sales, while accounts payable show which customer owes you money. b. Accounts receivable show your credit sales, while accounts payable show which customer owes you money. c. Accounts receivable show the customers who owe you money, and the accounts payable show the vendors to whom you owe money. d. Accounts receivable show the vendors who owe you money, and the accounts payable show the customers who owe you money. According to the cash method, what do you need to determine the amount of profit for a particular period? a. accounts receivable card and the check book deposits and checks. b. accounts payable card and inventory record. c. deposits, revenue, checks written for expenses and service charges. d. inventory record and checkbook deposits. One of the best ways to determine whether you have made a good profit is to: a. set a goal at the beginning of the year and compare your profit to that goal.

3

b. compare your rate of return on the business to the return which could be gained by using your resources in alternative ways. c. compare your profit to the 15% benchmark. If your return is over that amount, you are doing well. d. compare your return from your business against your savings at a local bank. 7. Businesses that only sell services do not maintain inventory records because: a. tracking the movements of items would be necessary. b. there is no goods to track c. inventory records are time consuming for services. d. only one inventory record is needed. 8. In a business, two items that you must withhold from their wages or salaries are: (Choose two letters.) a. Income Tax c. hospitalization b. SSS or GSIS d. scholarship 9. Which of the following activities is the best example of a controlling function of management? a. deciding the amount/type of supplies to be ordered b. telling employees about their specific responsibilities c. putting in a time-clock for employees. d. writing checks to make payments. 10. Prices are determined by: a. cost of production and market demand b. banks, as part of loan agreements c. city regulations; laws and business d. the Central Bank of the Philippines 11. Indicate an example of a typical fixed cost. a. cost of supplies to make an item c. profit b. rent d. mailing cost of items sold. 12. There are a number of factors to consider when relating to your customers. Which of the following is it. a. informing your customer of returns of your merchandise. b. knowing your product/service c. telling customers whatever it takes to make them feel good. d. trying to provide all products that your customer may want. 13. Which of the following types of financial information would a potential investor want to see in a business plan? a. start-up cost c. break-even point b. projected revenue d. all of the above 14. In SWOT analysis, there are forces such as inflation and unemployment rates, which are to be considered as external environment where opportunities and threats abound. Which one is it? a. economic forces c. political forces b. societal forces d. technological forces 15. An essential analytical tool for business which compares the Total Revenue and the Total cost is…

4

a. Break – Even Graph b. Break –Even Point

c. Break – Even Analysis d. Break – Even Point Sales Volume

5

Let Us Study

Words to Study Accountability is the obligation of an individual, firm, or institution account for its activities, accept responsibility for them and to disclose the results in a transparent manner. Accounting is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information Asset is something valuable that an enterprise owns, benefits from, or has use of, in generating income. In accounting, an asset is something an entity has acquired or purchased, and which has money value (its cost, book value, market value, or residual value Budget is the estimate of costs, revenues, and resources over a specified period, reflecting a management's reading of future financial conditions. One of the most important administrative tools, a budget serves also as a plan of action for achieving quantified objectives, standard for measuring performance, and device for coping with anticipated adverse situations. Business operations consists of handling money and recording day to – day transactions, computations, buying of materials and supplies, and checking of facilities Equity is the right to an asset or property, held by a creditor or a business owner. Evaluation deals with measuring business operations variable based on identified criteria. Liability are the accounts and wages payable, accrued rent and taxes, trade debt, and short and long-term loans. Owners' equity also is termed a liability because it is an obligation of the firm to its owners. Procurement is a complete process of obtaining goods and services from preparation and processing of a requisition to receipt and approval of the invoice for payment. Finance deals with matters related to money and the markets. Monitoring is supervising activities in progress to ensure they are on-course and on-schedule in meeting the objectives performance targets.

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I. INFORMATION SHEET 1 II. I.

Supervising and Monitoring Business Operations

A. Supervising and Monitoring

Why?

What?

How?

To ensure the successful operation of the business you need to monitor. This can be done through supervision. Proper supervision will enable you to assess and support the production performance, follow schedule and utilize material and work force wisely.

To effectively and efficiently monitor the business operations, the student-enterprise owner needs to be familiar with specific skills and techniques. You may seek advice from your entrepreneurship teacher if you think you lack the skills in doing the task of monitoring and evaluating the business you established.

Supervision is a very important technique you need to use in assuring the proper implementation of your business plan. Here are some common techniques: a. direct observation b. dialogue with worker c. dialogue with customers d. reviewing the market plan e. reviewing the production plan f. controlling supply and logistics hands-on

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Implementing Supervision:

Prepare a simple supervision plan and supervision guide. A simple yet adequate supervisory plan will help in assessing the quality of activities performed by each member of your enterprise.

Devise a Monitoring Curve and Control graph. This will ensure that you closely monitor the different quality indicators set for your product or services offered.

Create a checklist of the different qualitative information you want to assess after a quarter or a year of your business operation.

How to make a monitoring system: 1. Define the most important indicators with the help of an indicator matrix which may include the following: - process indicators selected for supervision - indicator for achieving goals defined in your Mission, Vision and Values Statement - Indicators for the evaluation of results and quality of the process 2. Define the components of the monitoring system based on the list of indicators selected previously and using a prioritization matrix with criteria such as: type of data collection, frequency of analysis, type of data processing, and responsibilities. 3. Define the standards for the indicators that you will use to interpret results of monitoring.

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B. Some Common Tools for Monitoring and Supervising Business Operations Used to: Tools Identify

market share, product performance, comparing sales

1. Bar Graph

2. Benchmarking 3. Checklist

4. Program Matrix

7. Indicator Matrix

Describe

market position

Analyze

sales, buying patterns

market share

customer preferences Different business activities quality of product/serv ice

Progress or accomplishments

Targets, goal attainment

product/service performance

The table above presents some of the most common qualitative tools in business monitoring and evaluation. These tools are used to identify, describe, or analyze business situations. Depending on the needs of your business you can choose any one or combination of some of these tools in order for you to evaluate your business. The main reason why you need to be familiarized with these tools is to avoid problems, make your operate effectively, and efficiently.

9

INFORMATION SHEET 2 One way of presenting data you gathered in the business operation is through a bar graph. It will help you to visualize the relationships among different categories of factors affecting your business such as financial data, sales, projections and trends. It is used when the information corresponds to a nominal scale, and when you want to compare two or more groups.

1. Bar Graph

Making a Bar Graph If you are not familiar with using Microsoft Excel, you can follow this simple steps to create a bar graph. 1. Draw vertical horizontal axes.

and

2. Create a scale on the vertical axis to measure the frequencies of the variable.

3. Note the nominal scale (different qualities variable).

4. Draw a rectangle for each quality of the variable.

Expected Production Per Month Figure 1 90 80 70 60 50 40

Students

30

Faculty

20

Community

December

November

October

September

August

July

June

May

April

March

February

0

January

10

10

Example of a bar showing the expected production per month of a student-based enterprise. Activity 1 Create a bar graph using the data from a market survey on bread preferences of students. If you are familiar with using Microsoft Excel you may do so. If not follow the instruction in making a bar graph from Information Sheet 1. Types of Bread Pandesal Cheese Monay Empanada Hopia Tasty Bread

Percentage 28% 24% 15% 26% 7%

Create your Bar Graph here.

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INFORMATION SHEET 3

2. Benchmarking

Benchmarking is both a supervisory and evaluation tool for business operation. It is a technique which compares the processes of one enterprise with those of similar enterprises to study ways to improve those processes. Benchmarking is used for analyzing strategies to improve the production processes, selling strategies, promotional and other operational strategies.

Steps in Benchmarking Select another organization to use as a “benchmark”. You identify an enterprise that provides similar product or services but ideally not your competitor, or the leader in the industry who is willing to share information with you.

Contact the identified “benchmarked” organization. Explain the purpose of your proposed visit, gain their support and set a date.

Make a site visit to collect data:  Determine in advance the kind of information you want.  Send a list of questions to your benchmark contact for them to prepare for your visit.  Agree on the agenda for the visit.  Set appointment for the meeting and make an ocular inspection of the benchmarked organization.  Request for the future plans of the process or information you are investigating.  Be ready to share the comparable information of your own organization.

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Make a report of your findings, set a new goal and use the results to propose improvements for your business.

Determine any important differences between the process used by your organization and the process used by the benchmarked organization.

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ASSIGNMENT SHEET 1 BENCHMARKING Instruction: Benchmark on a fish processing plant (homemade sardines, patis, and other products) in your community and prepare a report on packaging and production techniques they used. Benchmarked Enterprise Enterprise A Enterprise B Enterprise C

Production

Processes in: Packaging

Labeling

Analysis: _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ Things to be improved in my business _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________

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INFORMATION SHEET 4

3. Checklist/ Check Sheet

Process indicator, or lists of closed-ended questions are prepared based on the standards set for the purpose. It is used to ensure that different types of service or product providers in your organization are coping or complying with the identified standard of treatment stated in the checklist form. When you are trying to analyze a problem, or when you are trying to find out if a solution to a business operation problem was implemented successfully, it is used as consistency check of a process based on flow chart, customer flow, production and workflow in the business.

Steps in using Checklist 1. Review the steps of the process you want to observe. 2. Select the critical steps of the process. 3. Make a list of questions to check if the steps are performed. These questions should be “closed” or answerable by “yes” or “no”. 4. Perform the observation and collect data. Here is a sample of a checklist… CHECKLIST: CHOOSING A GEOGRAPHICAL LOCATION The following checklist includes several questions you should answer before making your ultimate decision on where to open your business. Be careful to factor in your own special circumstances, which do not necessarily appear on this list. Yes No Is the area zoned for this type of business? Are qualified employees available in the area? Is the site close to the markets served by the business? Are there any competitors in the area? Are the inventory and supplies the business needs available in the area? Can suppliers conveniently make deliveries to this area? Is public transportation accessible? Are the utilities needed to run the business available? Are there facilities nearby for transporting goods? Are the rates for transporting goods similar to or lower than in other areas? Does the cost of this facility in this location compare favorably with other areas? Do the taxes on this facility compare favorably with other areas? Do the taxes on the business compare favorably to those in other areas? Is the area suitable for expansion in the future? Are there adequate parking facilities for customers? Are there adequate parking facilities for employees? Is the traffic in the area compatible with this type of business? Are the wage scales in thisASSIGNMENT area similar to orSHEET lower than 2 other areas? Is this a safe area for employees, suppliers, and clients? Source: http://smallbusiness.findlaw.com/source/forms/be4_4_1.doc

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __

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__ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __

Instructions: 1. Prepare monitoring and evaluation checklist based on the identified business operation variables. Give at least three (3) items for each of the following.  Asset  Liability  Equity  Cash flow  Income  Production Plan  Marketing Plan  Sustainability  Linkages 2. After you prepared the checklist, have it edited by your classmate. 3. Trial-run your checklist. 4. Review the results of your trial run before finalizing the checklist. 5. Submit to your teacher the finalized checklist. Write your questionnaire in the box below

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INFORMATION SHEET 5

4. Program Matrix

Program Matrix presents the flow of specific business activity of the business at a glance. It spells out the plan on how you will achieve established objectives as stated in your business plan.

Step in Using Program Matrix 1.Establish your objective or target you want to accomplish. 2. List down the different activities need to take place to meet that objective. 3. Make a chart with the following headings: 4. Activities should specify the WHAT, HOW, and WHERE Indicators should be the specific criteria for evaluation purposes. Goal should be an expression of quantity “how much” will be and should be. Resources spells out provisions needed to support the Activities. Time frame should be realistic based on the activities and availability of resources 5. Fill out the chart, plan out the indicators, goals, resources, personnel and the time frame that make up your overall objective. BREADWINNER Bake Shop Program of Activities First Quarter of 2009 Activities

Purchasing

Selling

Indicators 98% of raw materials needed for one production cycle are made available Increase cash collections

Goal

Resources Purchasing officer

Increase 7% of quarterly sales based on 2008 Reports

Merchandiser

Sales personnel

Reporting Sales

Sales reports are submitted and evaluated

Accounting Clerk

Timeframe June 5 to June 15, 2009 June 16 to August 15, 2009 August 16 to 18, 2009

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Activity 2 Instruction: Prepare a program matrix for your business for OneQuarter MY Enterprises Program Matrix 2nd Quarter of 2009 Activities

Indicators

Goal

Resources

Timeframe

18

INFORMATION SHEET 6

5. Indicator Matrix

An enterprise owner can use an indicator to describe the business operations in terms of defined standards. It is developed by collecting data and then expressing it through quantitative formulas or by means of graphs and tables. You can use an indicator to diagnose a current situation, to compare characteristics of target markets or a process with other factors or to evaluate the variations of a business activity. To construct an indicator you need a matrix as a guide.

Preparing an Indicator 1. Identify the business variables you want to measure. 2. Describe the indicator in terms of proportions, time or frequency, percentage or rate. 3. Create a formula for the indicator. An indicator is composed of numerator (observable characteristics) and a denominator (the reference point) 4. Find out the sources in obtaining data such as financial records, daily reports, surveys, observations, interviews, etc.. depending on the information you want to translate into an indicator. 5. Identify the basis or standard of comparison. Now, if the indicator has been prepared, you can now create an indicator matrix like the table below. What to measure?

Description of an indicator

Formula

Source of Numerator

Source of Denominator

Quality Standard

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ACTIVITY 3 Prepare your own Indicator using the table below. See instructions below. What to measure?

Description of an indicator

Formula

Source of Numerator

Source of Denominator

Quality Standard

On the table above: 1. Write the questions on what you want to assess in your business operation. 2. Write the description of the indicator in the second column. 3. Write the formula on the third column. 4. Indicate on the fourth column the sources where the data can be obtained. 5. The standard of comparison should be written on the sixth column.

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II. INFORMATION SHEET 7

Evaluating Business Operations

 Assessment of business operations involves not only the qualitative description of how it operates. Equally important is your mastery of the quantitative approaches in monitoring and evaluating business operation for more objective treatment of some variables so that you can easily grasp the viability of your business activities  In module 7, you were given information about preparation and maintaining business records. Your familiarity with that information is very important in quantitative monitoring and evaluation of business operations.  Successful entrepreneurs are noted for being keen with numbers or figures in business. No business can grow over long term without an accurate financial recording or accounting system. It is essential in forecasting and projecting results for improvement.  Financial statement analysis involves careful selection of data from financial statements for the primary purpose of forecasting the financial health of your enterprise. This is accomplished by examining trends in key financial data, comparing financial data across companies, and analyzing key financial ratios.  Conclusions based on this ratio analysis must be regarded as tentative. Ratios should not be viewed as an end, but rather they should be viewed as a starting point, as indicators of what to pursue deeper in your business operation. In addition to ratios, other sources of data should be analyzed in order to make judgments about the future of an organization. You should also look, for example, at industry trends, technological changes, changes in consumer tastes, changes in broad economic factors, and changes within the firm itself.  Now you will be familiarized with the financial analysis of your business. Go over with the information sheet provided in the succeeding pages. Perform all the computation required as diligently as you can. You will find it handy as you mastered the different mathematical presentations for each method.

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INFORMATION SHEET 8

Useful Financial Ratios Why? Ratios are mathematical comparisons that can be used to provide a very effective indicator of the financial progress of a company at any given time. These ratios do not have to be difficult though this may sound very technical on your part as a student, you will only be needing a few of these ratios in your business. You are primarily looking for trends. To successfully manage your business, you need to be able to understand and interpret these ratios. Financial ratio is one of the most common methods in interpreting analyzing financial statements. Financial Ratio Analysis methods are: a. Profitability Ratio b. Liquidity Ratio c. Efficiency Ratio d. Financial Structure Ratio In computing the financial ratio analysis, you need the following accounting records: 1. Income Statement 2. Two-Column Balance Sheet 3. Projected Income Statement 4. Projected Balance Sheet

a. Analysis of Profitability

This type of ratio is composed of two types. One is the profitability compared with sales which help to determine how well each peso of sales generates profit. The second is the profitability compared with assets which help to determine how hard the assets are working to generate a profit.

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Gross Profit Margin(GPM). This ratio represents the average „gross‟ profit generated by each peso of sales.

Gross profit Margin = (Gross profit / Net sales) × 100

The formula reflects the relationship between the firm‟s pricing policies (gross sales) and its buying policies (cost of goods sold). Applying this “The Gross Profit margin of Breadwinner Bakeshop in 2009 actual and 2010 projected financial statement,” the computation following the formula, you can see that the firm is planning to increase gross profit margin from 37.5% in 2009 to 40.0% in 2010. This is due to Php2.00 increase in price at a time when the cost of goods sold is expected to increase by only Php1.00 per unit. Computations: Breadwinner 2009 = (Php225,000/Php600,000) x 100 = 37.5% (fig 2 & 3) Breadwinner 2010 =(Php500,000/1,250,000) x 100 = 40.0% (fig 4 & 5)

Note: A decline in gross profit margin should be viewed with concern because it usually represents a reduction in price or an increase in the cost of goods sold which is not being passed on to customers.

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For purposes of computations of the financial ratio analysis, use the prepared Income Statement (2009 & 2010) and Two-column Balance Sheet of the Breadwinner Bakeshop on Figures 1 to 4 Figure 1 BREADWINNER BAKESHOP Income Statement For the Year Ending May 30, 2009 Sales Cost of Goods Sold Beginning Inventory Purchases Less: Ending Inventory

600,000 45,000 392,500 62,500 375,000 225,000

Gross Profit Margin (___) Operating Expenses Owner's Salary Wages Commissions on Sales Advertising & Promotions Telephone & Electricity Bank Service Charges & Interest Insurance Depreciation Expense Miscellaneous Expense Net Profit Before Tax

18,000 73,500 15,000 60,000 5,000 5,000 2,500 6,000 10,000

195,000 30,000

Income Tax

12,000

Net Profit After Tax

18,000

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Figure 2 BREADWINNER BAKESHOP Projected Income Statement For the Year 2010 Sales

1,250,000

Cost of Goods Sold Beginning Inventory

62,500

Purchases

812,500

Less: Ending Inventory

125,000

Gross Profit Margin (___)

750,000 500,000

Operating Expenses Owner's Salary Wages Commissions on Sales Advertising & Promotions Telephone & Electricity Bank Service Charges & Interest Insurance

20,000 130,000 62,500 187,500 7,500 7,500 2,500

Depreciation Expense

10,000

Miscellaneous Expense

10,000

437,500

Net Profit Before Tax

62,500

Income Tax

25,000

Net Profit After Tax

37,500

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BREADWINNER BAKESHOP Balance Sheet May 30, 2009 ASSET Current Asset: Cash

LIABILITIES Current Liabilities Accounts Payable Accrued Expenses

6,500

Accounts Receivable

50,000

Inventory

62,500

Prepaid Expenses

1,000

120,000

Fixed Assets:

59,500 500

Long-term Liabilities Mortgage on Land & Building

60,000

30,000

Land

13,000

Bank Loan

Buildings

25,000

TOTAL LIABILITIES

100,000

Equipment

60,000

(Less Accumulated Depreciation) Other Assets

(18,000) -

80,000

OWNER'S EQUITY

100,000

200,000

TOTAL LIABILTIES & OWNER'S EQUITY

200,000

TOTAL ASSETS

10,000

40,000

Figure 4 BREADWINNER BAKESHOP Balance Sheet May 30, 2010 ASSET Current Asset:

LIABILITIES Current Liabilities

Cash Accounts Receivable

-

Accounts Payable

104,000

Accrued Expenses

Inventory Prepaid Expenses

125,000

Bank Overdraft

1,000

230,000

Fixed Assets:

128,500 500 21,000

150,000

Long-term Liabilities Mortgage on Land & Building

27,500 10,000

Land

13,000

Bank Loan

Buildings

25,000

TOTAL LIABILITIES

187,500

Equipment (Less Accumulated Depreciation)

44,500 82,500

OWNER'S EQUITY

125,000

312,500

TOTAL LIABILITIES & OWNER'S EQUITY

312,500

Other Assets TOTAL ASSETS

(28,000)

37,500

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Net Profit Margin (NPM) The ratio represents the average „net‟ profit earned by each peso of sales. It reflects profitability after the operating costs of doing business have been deducted from gross profit.

Net Profit Margin = (Net Profit before tax/Sales) x 100

Computations: Breadwinner 2009 and 2010 Net Profit Margin (2009) = (30,000/600,000) x 100 = 5% Net Profit Margin (2010) = (62,500/1,250,000) x 100 = 5% Think About… “Why do you think, in-spite of the increase in Breadwinners projected Net Income, the net profit margin has remained unchanged?” Return on Assets (ROA) This analysis focuses on the earning performance of your enterprise‟s assets. You will need to look into Income Statement in the Balance Sheet to compute the ROA.

Return On Assets = (Net Profit before tax/Total Assets) x 100

Computations: Return On Assets (2009) = (30,000/200,000) x 100 = 15% of 200,000 Return On Assets (2010) = (62,500/312,500) x 100 = 20% of 312,500 Data from Income Statement and Balance Sheet 2009 & 2010 The computed ROA shows that there is an increase from 15% to 20%. It means that the Breadwinner‟s rate of profit is increasing faster than the asset base.

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If there is a decrease in the ROA it means that the expenses rise faster than the sales revenue. Thus, ROA should always be computed and analyzed based on the gross and net profit margins. A decrease can also occur if the asset base increases at a faster rate than the profit. Return on Owner’s Equity (ROE/ROI) The earning power of the owner‟s investment in the business is measured in terms of ratio between the net profit before tax and the owners‟ equity. The Owner‟s Equity is equal the Net Assets (total assets minus total liabilities). If there are no liabilities, then it is equal to return on assets. This only happens if your business will not resort to borrowing from loan companies. In most cases though, the owner‟s equity is always less than 100% of the assets employed and the return on owner‟s equity may be different from the return on assets.

Return On Owners’s Equity = (Net Profit before tax/OE) x 100 OE – Owner’s Equity

Computations: Return On Owner‟s Equity (2009) = (30,000/100,000) x 100 = 30% Return On Owner‟s Equity (2010) = (62,500/125,000) x 100 = 50% Data from Income Statement and Balance Sheet 2009 & 2010

b. Liquidity Ratio The enterprise ability to meet its financial obligation and commitment is determined in a Liquidity Ratio. If your enterprise cannot meet the obligations, then there is a need to take a closer look on how you can shape-up your financial and cash flow budgeting. Liquidity Ratio is expressed in terms of Current Ratio (CR) and Liquid Ratio (LR). To compute for CR and LR you need information from the end of the period and projected Balance Sheets. Current Ratio. This is the relationship between the current assets and he current liabilities. Current Ratio = (Current Asset/Current Liabilities)

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Computations: Current Ratio (2009) = (120,000/60,000) x 100 = 2.0 Current Ratio (2010) = (230,000/150,000) x 100 = 1.5 Data from Income Statement and Balance Sheet 2009 & 2010 Breadwinner‟s current ratio is projected to deteriorate in 2010 because the current liabilities are rising at a faster rate than the current assets. It means that the bakeshop‟s ability to meet its obligation in the coming years will also decrease. Loan companies and banks consider this information seriously. If you are the owner of Breadwinner Bakeshop, you need to consider this before applying for loan. The rule of thumb here says that a business should attempt to maintain a current ratio of at least 2:1. However, this needs to be interpreted according to individual circumstances of each business. Liquid Ratio. One of the tools to assess the enterprise‟s capacity to pay its obligations is liquidity. Many loan providers prefer to evaluate the business ability to pay in terms of liquid ratio. This is the difference between the current asset and the inventory divided by the current liabilities. Liquid Ratio= Current Asset – Inventory/Total Assets Computations: Liquid Ratio (2009) = (120,000-62,500/60,000) x 100 = 0.96 Liquid Ratio (2010) = (230,000 – 125,000/150,000) x 100 = 0.70 Data from Income Statement and Balance Sheet 2009 & 2010 The rule - of - thumb in liquid ratio is 1:1. As you can see, Breadwinner‟s liquid ratio is 0.96 : 0.70, which means that their 2010 ratio is slightly unfavorable. However, using the 1:1 basis should also be interpreted with utmost care.

c. Efficiency Ratio

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The efficient use of assets is measured by the frequency of their turnover. When all the assets are efficiently used, the return on assets is maximized. Asset Turnover is the measure of how effectively the enterprise‟s assets are working to generate sales.. Asset Turnover= Sales/Total Assets) x 100 Computations: Asset Turnover (2009) = 600,000/200,000 = 3 Asset Turnover (2010) = 1,250,000 /312,500 = 4 Data from Income Statement and Balance Sheet 2009 & 2010 Breadwinner‟s Asset Turnover forecast shows an improvement in 2010 asset turnover from 3 to 4 times. This means that the asset base will be working more efficiently to generate sales in 2010. Many small enterprise owners adapt the use of accounts receivable and inventory turnover in greater detail. These two current assets are primarily important for computing efficiency and liquidity ratios. Accounts Receivable Turnover (ART) reflects promptness of the business in collecting accounts receivables from customers. Ideally, the faster accounts receivables are collected, the better.

Accounts Receivable Turnover = Sales/ART) x 100 ART - Accounts Receivable Turnover

Computations: Accounts Receivable Turnover (2009) = 12 times

600,000/50,000 =

Accounts Receivable Turnover (2010) = 1,250,000/104,000 = 12 times Data from Income Statement and Balance Sheet 2009 & 2010 Based on the computations, the Breadwinner‟s ART is 12 times both for 2009 and 2010. However, converting this ART into Average Collection period gives clearer information on how fast the business collects the Accounts Receivables from its debtors.

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Average Collection Period = 360 days/ART) ART - Accounts Receivable Turnover

Computations: Average Collection Period (2009) = 360/12 times = 30 days Average Collection Period (2010) = 360/12 times = 30 days Data from Income Statement and Balance Sheet 2009 & 2010 The Average Collection Period of Accounts Receivable of Breadwinner is 30 days for both years. The significance of computing the ACP is to compare the age of accounts receivables from one period to another. If the average collection period is longer, it is often a danger signal that the enterprise is becoming dependent on too many slow payers. It also means that the enterprise is carrying some bad debts that should be written off. If the ACP is much shorter than the industry average, the firm might consider taking a few more credit risk to expand or increase sales. Inventory Turnover This is the ratio which reflects how fast the inventory turns over or sells during the year. The ideal is for you to aim at the highest rate of inventory turnover without too many stocks outs and lost sales. Inventory Turnover = Cost of Goods Sold/Inventory Ending

Computations: Inventory Turnover (2009) = 375,000/62,500 = 6 times Inventory Turnover (2010) = 750,000/125,000 = 6 times Data from Income Statement and Balance Sheet 2009 & 2010 Inventory Turnover of Breadwinner is 6 times from 2009 to 2010. It is just an average. This can be increased to stimulate sales.

d. Financial Structure Ratio 31

Financial Structure Ratio refers to the relationship between the debt and equity of the business. This relationship determines who really owns the business, the owner or the creditor. Most of the successful entrepreneur started their business without adequate capital. With great propensity in taking risk, they resort on capital borrowing from banks and lending institution. Engaging in capital or investment borrowing is a healthy practice in business community. However, you have to take precautionary measures before resorting to it. Familiarity with Financial Structure ratio will help you decide if your enterprise can go on to borrowing money. One way of looking at financial structure is to focus on the proportion of the business represented by the owner‟s investment. This is the ownership ratio. The ownership ratio reflects the proportion of the total assets, which are represented by the owner‟s funds. The difference represents the part of the firm‟s assets funded by its creditors.

Ownership Ratio = (Owner’s Equity/Total Asset) x 100

Computations: Ownership Ratio (2009) = 100,000/200,000 = 50% Ownership Ratio (2010) = 125,000/312,000 = 40% Data from Income Statement and Balance Sheet 2009 & 2010 Breadwinner Bakeshop‟s balance sheet and income statement shows that the ownership ratio in 2009 is 50%. This means that half of the bakeshop‟s investments come from its creditors. While in 2010, the owner has only 40% funds in the business. So the greater portion of the investment is now with the creditors which own 60% of the enterprise. WORKSHEET 1 ArteCulante ENTERPRISES Income Statement For the Year Ending May 30, 2009 Sales

300,000

Cost of Goods Sold Beginning Inventory

22,500

32

Purchases

196,250

Less: Ending Inventory

31,250

Gross Profit Margin (___)

___________ 112,500

Operating Expenses Owner's Salary

9,000

Wages

36,750

Commissions on Sales

7,500

Advertising & Promotions Telephone & Electricity Bank Service Charges & Interest

30,000 2,500 2,500

Insurance

1,250

Depreciation Expense

3,000

Miscellaneous Expense

5,000

________

Net Profit Before Tax

30,000

Income Tax

12,000

Net Profit After Tax

_________

Your Task: Based on the above Income Statement of ArteCulante Enterprises for the Year Ending December 30, 2008, compute for: a. b. c. d.

Cost of Goods Sold Total Operating Expenses Net Profit After Tax Gross Profit Margin WORKSHEET 2

ArteCulante ENTERPRISES Projected Income Statement For the Year 2010 Sales

625,000

Cost of Goods Sold Beginning Inventory Purchases Less: Ending Inventory

31,250 406,250 62,500

Gross Profit Margin (___)

________ ________

Operating Expenses Owner's Salary

10,000

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Wages Commissions on Sales Advertising & Promotions Telephone & Electricity Bank Service Charges & Interest

65,000 31,250 93,750 3,750 3,750

Insurance

1,250

Depreciation Expense

5,000

Miscellaneous Expense

5,000

Net Profit Before Tax

-----------------------

Income Tax

25,000

Net Profit After Tax

-------------

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Your Tasks: 1. Based on the above Projected Income Statement of ArteCulante Enterprises for 2009, compute for: a. Cost of Goods Sold b. Gross Profit c. Total Operating Expenses d. Net Profit Before Tax e. Net Profit After Tax f. Gross Profit Margin g. Return on Assets h. Return On Owner‟s Equity 2. Compare the Income Statement for 2008 and the Projected Income Statement and answer the following: a. Was there a change in the Profit Margin? b. Is the ArteCulante Enterprises generating profit? 3. Justify if the enterprise owner can borrow additional investment based on the result of your computations in II. a & b. WORKSHEET 3 ArteCulante ENTERPRISES Balance Sheet May 30, 2009 ASSET

LIABILITIES

Current Asset: Cash

Current Liabilities 3,250

Accounts Payable

Accounts Receivable

25,000

Accrued Expenses

Inventory

31,250

Prepaid Expenses

500

----------

Fixed Assets: Land

6,500

Buildings

12,500

Equipment

30,000

(Less Accumulated Depreciation) Other Assets TOTAL ASSETS

(9,000)

29,750

Long-term Liabilities Mortgage on Land & Building Bank Loan

500

60,000

15,000 5,000

40,000

TOTAL LIABILITIES

------------

-----------

OWNER'S EQUITY

100,000

-----------

TOTAL LIABILITIES & OWNER'S EQUITY

-------------

-

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Your Tasks: 1. Based on the above Two-Column Balance Sheet of ArteCulante Enterprises for the December 30, 2008, compute the following:     

Total Total Total Total Total

Current Assets fixed Assets Assets Owner‟s Equity Liabilities and Owner‟s Equity

WORKSHEET 4 ArteCulante ENTERPRISES Balance Sheet May 30, 2010 ASSET

LIABILITIES

Current Asset:

Current Liabilities

Cash

-

Accounts Payable

Accounts Receivable

104,000

Accrued Expenses

Inventory

125,000

Bank Overdraft

Prepaid Expenses

1,000

230,000

Fixed Assets:

128,500 500 21,000

----------

Long-term Liabilities Mortgage on Land & Building

27,500 10,000

Land

13,000

Bank Loan

Buildings

25,000

TOTAL LIABILITIES

----------

Equipment (Less Accumulated Depreciation)

44,500 82,500

OWNER'S EQUITY

125,000

-----------

TOTAL LIABILITIES & OWNER'S EQUITY

------------

(28,000)

Other Assets TOTAL ASSETS

----------

Your Tasks: 1. Based on the above Two-Column Balance Sheet of ArteCulante Enterprises for the December 30, 2008, compute the following: a. Total Assets b. Total Current Liabilities c. Total Long-term Liabilities d. Total Liabilities e. Total Liabilities and Owner‟s Equity 2. Compare the Balance Sheet in 2008 and the projected balance sheet for 2009 and compute for the following ratio: a. Current ratio b. Liquid ratio c. Asset Turnover d. Accounts Receivable Turnover e. Inventory Turnover f. Ownership Ratio

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3. Describe the efficiency and the financial structure of the enterprise LET US APPLY WHAT YOU HAVE LEARNED A. Instruction: The table below summarizes the financial assessment tools you learned in Lesson 2.  Using the Income Statement and Balance Sheet for 2008 and 2009(Projected) of ArteCulante Enterprises, fill in the Numerical Value column what you have computed from Work Sheet 6.1 to 6.4.  On the Analysis Column give your analysis of the business operation situation of ArteCulante Enterprise.  After you completed the SUMMARY OF FINANCIAL REPORT for ARTECULANTE ENTERPRISES, make a status report enterprise owner. Use the format provided. ARTECULANTE ENTERPRISES SUMMARY OF FINANCIAL REPORT

Financial Assessment Tool

Ratio

Numerical Value

Analysis

Gross Profit Margin

Profitability

? Return On Assets

? Liquidity

Current Ratio ? ?

Efficiency

Accounts Receivable Turnover ?

Financial Structure ?

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B. Status Report ARTECULANTE ENTERPRISES 2ND Quarter of 2009 i.

Introduction (Not more than 50 words.) ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ________________.

ii.

iii.

iv.

v.

Financial Status: (Provide Graphical presentations using 2005 as the Benchmark year for the following: a. Profitability (Profit margin, return on assets and investments) b. Liquidity c. Efficiency d. Financial Structure Summary of Monitoring and Evaluation Report conducted a. Employee/Staff/Worker observed. b. Results of the dialogue with personnel conducted c. Results of the market and production plan reviews Future plans based on the financial status. ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ Recommendations: 1. _________________________________________________________ 2. _________________________________________________________ 3. _________________________________________________________

Prepared by: ___________________________________ ___________________________________

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C. Based on the Status Report Recommendations, analyze the actual operation of your business as outlined in your business plan by filling-up the table below. Business Operation Factors

Analysis

Problems Met

Actions

5 – attained successfully 3 – in-progress 1 – not attained

1. Financial Projection 2. Return on Asset 3. Return on Equity 4. Vision, Mission and Values 5. Social Responsibility D. Answer the following: 1. How did your business performed for the year? __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ 2. Will you continue your business operation based on you answer in number 1? If not, why? __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ __________________________________________________________________

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LET US REMEMBER 1. The different tools used in monitoring business operations are: a. bar graph b. benchmarking c. checklist d. program matrix e. indicator matrix 2. In order to monitor and evaluate the business operations we have to employ some techniques like: a. direct observation b. dialogue with personnel c. review market plan d. review production plan e. control supply and logistics f. hands-on 3. The different quantitative tools used in evaluating financial operations of the business are: a. Profitability which include Gross profit Margin, Net Profit Margin, Return on Assets and Return on Equity b. Liquidity which covers Current and Liquid ratios. c. Efficiency Turnover of accounts receivables and inventories. d. Financial Structure which identifies ownership ratio. 4. Reporting results of qualitative and quantitative monitoring and evaluation must be brief and objective. It should be regularly done to keep abreast with the changes in the business environment. Moreover, it should gear towards the improvement of the business operations.

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HOW MUCH HAVE YOU LEARNED? Post Test Directions: Let us find out how much you have learned about assessing business operations. Answer the questions below as honestly as you can. Write the words or letter of the correct answers in the provided answer sheet. 1. Which of the following statement gives the purpose of using a supervision plan? a. Assess the quality of activities performed by each member of the enterprise. b. Effectively monitor the business operations. c. Ensure the successful operation of the business. d. Utilize material and work force wisely. 2. Which is NOT included in the steps for developing a monitoring system? a. Defining indicators b. Identifying components of the monitoring system c. Defining the standards for indicators to be used d. Identifying the market share to be monitored 3. Among the common tools for qualitative monitoring and evaluating business operations, which will best describe a market position? I. Bar Graph III. Program Matrix II. Benchmarking Matrix IV. Checklist a. I only b. I & II only c. I, II, III only d. I, II, III, and IV 4. What is the correct step in benchmarking? I. Determining the differences in the process of your business and that of the benchmarked business. II. Selecting an organization to be benchmarked. III. Contacting the “benchmarked” organization. IV. Visiting the site to collect the needed data. a. I, II, III, IV c. III, IV, II, I b. II, III, IV, I d. II, III, IV, I 5. It is used to diagnose a current situation of the business operation and to evaluate the variations of business activity. a. Program Matrix c. Bar Graph b. Indicator Marix d. Checklist 6. It is a technique in financial analysis, which compares two or more year‟s financial data. a. Horizontal analysis c. Graphical analysis b. Vertical analysis d. Quantitative analysis 7. It states various years financial data in terms of a base year. a. Vertical Percentage c. Trend Percentage b. Horizontal Percentage d. Capital Percentage 8. Which is not needed in computing financial ratio? a. Income Statement b. Two-column balance sheet

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c. Statement of Assets and Liabilities d. Statement of Account 9. When you computed for the Return on Assets of your business, you found out that the ROA increased from 12% to 18%. How would you interpret this increase? a. It means that the expense increases faster than the sales revenue. b. It means that there is an increase in assets. c. It means that the sales is greater than the liabilities. d. It means that the rate of profit increases faster than the asset base. 10. In computing the Cost of Goods sold, how do we treat the Ending Inventory? a. Subtract it to the Beginning Inventory b. Subtract it to the Operating Expenses c. Add it to the Purchases d. Add it to the Beginning Inventory 11. When do you say that “a business is liquid”? a. When the current asset is greater than current liabilities b. When the current asset is less than the current liabilities c. When the current liabilities and current assets are equal d. When the current liabilities is greater than the asset 12. In computing the efficiency ratio, which two entries in the balance you will use? a. Sales and total liabilities b. Sales and total equities c. Sales and total assets d. Sales and the total assets and liabilities 13. The average collection period of ArteCulante Enterprise is longer than 90 days. What does this mean? a. ArteCulante Enterprises has many prompt payers. b. ArteCulante Enterprises has many slow payers c. ArteCulante Enterprises‟ bad debts will increase d. ArteCulante Enterprises‟ payment collection is effective 14. In the year-end inventory in your business, you found out that the there are lots of stocks left unsold. How this will affect your Inventory Turnover? a. It will equalize the rate inventory turnover b. It will normalize the rate of inventory turnover c. It will increase the rate of inventory turnover d. It will decrease the rate of inventory turnover. 15. If the ownership ratio of the enterprise is 60% it means that majority of the enterprise‟s assets belongs to the: a. owner c. creditor b. government d. debtor

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RESOURCES: o o o o o o

pencil calculator handouts writing materials worksheets templates

REFERENCES: Pfeffer J., and R Sutton, The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action, Harvard Business School Press, 2000. Davenport, Thomas (1993), Process Innovation. Harvard University Press: Cambridge, MA. Suchman, Lucy (1987), Plans and Situated Actions. Cambridge University Press: Cambridge, England Camposano, Jorge A. (2007), Entrepreneurship for Modern Business. National Bookstore: Manila, Philippines Cuyugan, Jorge H. (2005), A Business Planning Manual. Booklore Publishing Corp.: Manila, Philippines ….Module on Problem Solving and Decision Making, (2007), Department of Trade and Industry: Pasay City, Philippines. ….Business Plan, Breadwinner (2007), Muntinlupa Business High School, Muntilupa City, Philippines.

http://smallbusiness.findlaw.com/source/forms/be4_4_1.doc

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KEY TO CORRECTION Post Test 1. 2. 3. 4. 5.

a. d b d b

6. a 7. c 8. d 9. d 10. a

11. 12. 13. 14. 15.

a c b d a

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ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, May 25 – 30, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Gilbert Camayang Cabrroguiz National School of Arts and Trade Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Mr. Fernando C. Agustin Bukig National Arts and Trade School Mrs. Leona M. Tomas San Pedro National High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

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ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, June 5 -7, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Mr. Alfonso P. Rodriguez Jr. Muntinlupa Business High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Dr. Estrellita Evangelista Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

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ACKNOWLEDGMENT Copyright Department of Education 2009 This module was based on the Writeshop on the Development of the Competency-Based Curriculum (CBC) for Entrepreneurship for Technical Vocational High School conducted at Marikina Hotel Marikina City, July 1to 5, 2009 This learning instrument was developed by the following personnel: Dr. Reynaldo M. Valdez Jones Rural School Group Leader Dr. Celedonia T. Teneza Benigno Aquino High School Writer/Facilitator: Mr. Rene G. Delfino Muntinlupa Business High School Editor: Carolina F. Chavez, Aida T. Galuran, Beatriz A. Adriano & Dr. Corazon C. Echano Encoder: Mrs. Marisol E. Saldivar

Funding: Department of Education

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