Kingfisher School of Business and Finance

V. Technical Feasibility

A. Production Process

Preparation of materials Washing of Ingredient Drying of Chili

Cooking Blending of Chili and Chopping of Garlic

Garlic

Cooling Packing Storing

Source: Google images

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Production Process of Royal Bites’ Garlic Chili Oil:

Step 1 Preparation of the following ingredients and materials: (Good for 5 cases or 120
jars of 227 grams chili garlic oil)
 10 kg siling labuyo
 3 kg Garlic
 1 gallon vegetable oil
 2 kg Brown Sugar
 Knife
 Chop Board
 Containers
 Bowls
 Utensils
 Pan
 Measuring Materials
 Ladle
 Drying Net
 Blender
Step 2 Wash the siling labuyo and the materials needed.

Step 3 Sun-dry the siling labuyo for three (3) to five (5) days.

Step 4 Chop the garlic into smaller pieces.

Step 5 Blender the dried siling labuyo and the chop garlic.
Step 6 Heat oil in a pan over medium heat.

Step 7 Put the garlic in the pan. Wait until the garlic is golden brown and then mix the
siling labuyo.

Step 8 Cook and stir until it turns to red.

Step 9 Add the brown sugar and cook until thickens.
Step 10 After cooking, set aside to cool for 1 day or until the heat subside.

Step 11 After cooling, pack the chili oil to the jars and sachets.
Step 12 Place the jars on the cases (1 case contains 24 jars) and the sachets on the case
(1 box contains 24 packs).
Step 13 Seal the case and place in a storage room.

The production process of Chili garlic oil starts in preparing the ingredients and the

materials needed. Wash the siling labuyo and the materials required. Next, sun dry the siling

labuyo using a drying net for about 3 to 5 days. . Get the previously dried siling labuyo. Next,

chop the garlic into smaller pieces. After drying, blend the siling labuyo and garlic. Afterwards,

heat the oil in a pan over medium heat. Sauté the garlic until golden brown and then add the

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grinded siling labuyo. Now, if the mixture turns to red, add the brown sugar. Cook and stir

carefully. After cooking, set aside to cool for 1 day or until the heat subside. Once the chili garlic

oil is already cooled, start packing the chili garlic oil on jars and sachets. After packing, place

the jars and the sachets on the cases and keep for storage.

Production Process of Royal Shots’ Chili Oil:

Step 1 Preparation of the following ingredients and materials: (Good for 5 cases or 120
jars of 227 grams chili oil)
 10 kg siling labuyo
 1 gallon vegetable oil
 2 kg Brown Sugar
 Knife
 Chop Board
 Containers
 Bowls
 Utensils
 Pan
 Measuring Materials
 Ladle
 Drying Net
 Blender

Step 2 Wash the siling labuyo and the materials needed.

Step 3 Sun-dry the siling labuyo for three (3) to five (5) days.

Step 4 Blender the dried siling labuyo.

Step 5 Heat oil in a pan over medium heat.

Step 6 Sauté the garlic in the pan. Wait until the garlic is golden brown and then mix the
grinded siling labuyo.
Step 7 Cook and stir until it turns to red.
Step 8 Add the brown sugar and cook until thickens.

Step 9 After cooking, set aside to cool for 1 day or until the heat subside.

Step 10 After cooling, pack the chili garlic oil to the jars and sachets.

Step 11 Place the jars on the cases (1 case contains 24 jars) and the sachets on the box
(1 box contain 24 sachets).

Step 12 Seal the box and place in a storage room.

The production process of Chili oil starts in preparing the ingredients and the materials

needed. Wash the siling labuyo and the materials needed. Next, sun dry the 10 kg siling labuyo

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Kingfisher School of Business and Finance

using a drying net for about 3 to 5 days. Get the previously dried siling labuyo. Next, chop the

garlic. After chopping, grind siling labuyo and garlic using a blender. Afterwards, heat the oil in a

pan over medium heat. Sauté the garlic until golden brown and then add pulverized siling

labuyo. Now, if the mixture turns to red, add the brown sugar. Cook and stir carefully. After

cooking, set aside to cool for 1 day or until the heat subside. Once the chili garlic oil is already

cooled, start packing the chili garlic oil on jars and sachets. After packing place the jars and

sachet on the cases and keep for storage.

B. Flowchart of Activities

Production Cycle

Transfer to production
Procurement Inspection of (Production Manager)
of materials
materials
needed

Production process

Packing

Quality
Not approved Approved
Testing

Storage
Rework

Distribution

Legends:
Beginning Inspection Decision Sub-process

Process Documentation Flow of Recording

of receipts process

The production cycle starts with the procurement of raw materials by the purchasing

manager that will be needed for production. Upon receipt of the goods or materials an

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inspection of the received goods will be conducted to ensure the quality standards of the raw

materials and to check if the goods purchased was actually received. Afterwards, the materials

will be transferred to the production process to be followed by the packaging process. The

finished goods then will undergo quality testing by the production manager. If the finished goods

passed the quality control it will be up for storage and if the goods does not pass the quality

control then it will undergo rework. The stored products will then be distributed to customers.

Expenditure Cycle

Prepare
Supplier Purchase
Order

Prepare Cash
Receive
Goods/ Disbursement
Materials

Journal
Receiving Voucher
Report

Post to
General
Ledger
Ledger

The expenditure cycle of the business starts from the issuance of purchase order by the

purchasing manager to the supplier. The company will follow a purchasing schedule wherein

purchase of materials will be conducted when the stocks are measured at a specific low level.

At the moment the goods were received by the purchasing manager, the goods or materials will

be check to make sure the materials received corresponds what is ordered. The receiving report

will then be presented to the treasurer for the right disbursement of payment. Afterwards the

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Kingfisher School of Business and Finance

bookkeeper will post the transaction to the journal vouchers and update the corresponding

ledger accounts.

Revenue Cycle

Customer Prepare Sales Stock release

Order (Storeroom)

Receipt of
Cash
Sales invoice for Prepare
customer Sales
Invoice

Sales, A/R & Sales invoice for

Cash Journal Recording
and Ledger

The revenue cycle of Chili Royale starts when a customer made a sales order. The

business will be disposing its products by supplying to restaurants, joining trade fairs and by

contracting a distributor. The sales order will be presented by the sales and marketing manager

to the inventory custodian for stock release from the stockroom. After the stock release, the

treasurer will prepare two copies of sales invoice to serve as the customer’s copy and the

business’ copy for recording purposes.

Upon issuance of the invoice, the customer will be tendering the payment based on the

terms agreed. The term of payment with the distributor is 50% cash and 50% on account

payable on the next release of orders. The bookkeeper will update the accounts receivable

subsidiary ledger and sales journal on the orders made on account. On the other hand, if the

order was made on cash, the bookkeeper will properly record the transaction in the cash

receipts ledger and sales journal together with the other cash receipts for that day. For internal

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control purposes all cash receipts collected in a day will be compared to the recorded amounts

on the books of the company.

C. Gantt Chart

GANTT CHART
th

ne
r il
pt
n

ly
y

g
v

r
n
t
Mo

Ma

Ma
No

Ap

Au
Oc

De
Se

Fe

Ju

Ju
Ja
Activity 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
A. Renovation of Facility
B. Registration of Business
C. Label Execution
D. Microbial Test
E. Nutritional Facts Analysis
F. Purchasing of Vehicle
G. Acquisition of Equipment
H. Installation and Testing of Equipment
I. Hiring Training of Personnel
J. Procurement of Raw Materials
L. Production of Products
M. Distribution of Products

Table 5.1: Gantt Chart

The chart above illustrates the plan of the business for the flow of its activities on its first

fiscal year of operation. The renovation of the production and storage area will last for one

month which will undergo renovation like painting, installation of exhaust fans and additional

wirings and sockets, replacement of doorknobs, roofing sheets and pipes. According to Ivory

Santos, Negosyo Center Councilor of DTI-Lingayen, the requirements needed for the

registration of the business will took two months since the registration to Securities and

Exchange Commission takes time to process. The procurement of raw materials and production

process will start at the first week of January because it is the start of the harvesting season of

siling labuyo. The schedule of the procurement of raw materials and drying of the siling labuyo

will be scheduled on the first week of each month, production of chili oil and chili garlic oil in the

second week of each month. The distribution of the product will happen on the end of the

second and last week of the month.

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D. Production Timetable
MONTHLY PRODUCTION

Units Produced (Chili Oil)

Year 1 Year 2 Year 3 Year 4 Year 5
Month 227 10 227 10 227 10 227 10 227 10
grams grams grams grams grams grams grams grams
(pack) grams (pack) grams (pack) (pack) (pack)
September 0 0 3,000 2,040 3,240 2,280 3,600 2,640 4,080 3,120
October 0 0 3,000 2,040 3,240 2,280 3,600 2,640 4,080 3,120
November 0 0 2,880 1,920 3,120 2,160 3,480 2,520 3,960 3,000
December 0 0 2,880 1,920 3,120 2,160 3,480 2,520 3,960 3,000
January 2,880 1,920 3,000 2,040 3,240 2,280 3,600 2,640 4,080 3,120
February 2,880 1,920 3,000 2,040 3,240 2,280 3,600 2,640 4,080 3,120
March 3,600 2,400 3,720 2,520 3,960 2,760 4,320 3,120 4,800 3,600
April 3,600 2,400 3,720 2,520 3,960 2,760 4,320 3,120 4,800 3,600
May 3,600 2,400 3,720 2,520 3,960 2,760 4,320 3,120 4,800 3,600
June 3,600 2,400 3,720 2,520 3,960 2,760 4,320 3,120 4,800 3,600
July 2,880 1,920 3,000 2,040 3,240 2,280 3,600 2,640 4,080 3,120
August 2,880 1,920 3,000 2,040 3,240 2,280 3,600 2,640 4,080 3,120
Total 25,920 17,280 38,640 26,160 41,520 29,040 45,840 33,360 51,600 39,120

Table: Chili Oil Monthly Production

Year 1 Year 2 Year 3 Year 4 Year 5

Month 227 10 227 10 227 10 227 10 227 10
grams grams grams grams grams grams grams grams grams grams
September 0 0 3,240 2,280 3,480 2,520 3,840 2,880 4,320 3,360

October 0 0 3,240 2,280 3,480 2,520 3,840 2,880 4,320 3,360

November 0 0 3,120 2,160 3,360 2,400 3,620 2,760 4,200 3,240

December 0 0 3,120 2,160 3,360 2,400 3,620 2,760 4,200 3,240

January 3,120 2,160 3,240 2,280 3,480 2,520 3,840 2,880 4,320 3,360
February 3,120 2,160 3,240 2,280 3,480 2,520 3,840 2,880 4,320 3,360
March 3,840 2,640 3,960 2,760 4,200 2,880 4,560 3,000 5,040 3,480
April 3,840 2,640 3,960 2,760 4,200 2,880 4,560 3,000 5,040 3,480
May 3,840 2,640 3,960 2,760 4,200 2,880 4,560 3,000 5,040 3,480
June 3,840 2,640 3,960 2,760 4,200 2,880 4,560 3,000 5,040 3,480
July 3,120 2,160 3,240 2,280 3,480 2,520 3,840 2,880 4,320 3,360
August 3,120 2,160 3,240 2,280 3,480 2,520 3,840 2,880 4,320 3,360
Total 27,840 19,200 41,520 29,040 44,400 31,440 48,520 34,800 54,480 40,560

Table: Chili Garlic Oil Monthly Production

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Months of March, April, May and June are considered to be the peak months of siling

labuyo, thus, in order to take advantage of its low price ranging from Php 40.00 to Php 60.00 the

quantity produced during the said months is greater compared to the normal season of siling

labuyo.

E. Facility Layout

Figure 5.1: Floor Plan of the Facility Layout

LEGEND:
The facility layout of Chili Royale is divided into three

sections: the manufacturing area, washing area and storage

room. The manufacturing area is the largest part of the facility

that has a length of 3.45gas ram and a width of 4.40m. The

manufacturing area includes 2 set of cabinets, 3 working tables

and 3 gas stoves. The next part of the facility is the storage

room which has a width of 2.40m and length of 3.80m, which also have a cabinet. The next

room would be the washing area that is the smallest part of the facility, with a length of 3.80m

and width of 2m which have 2 sets of hanging cabinets and two sinks.

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E. Initial Investment

Each of the seven capitalist partners will be contributing Php 95,000.00 to have an initial

investment of Php 665,000.00. The investment will be allocated into the following breakdowns:

Notes Breakdown Amount

A Business Registration Fees 68,334.50
B Renovation Cost 40,562.88
C Marketing Expenses 87, 350.00
D Capital Assets 113,287.00
E Kitchen Utensils 1,590.00
F Other Assets 1,720.00
G Office Equipment 19,000.00
H Furniture and Fixtures 15,520.00
I Inventories 269, 500.00
J Three months’ rent 15,000.00
Contingency Fund 33,135.62
Total 665,000 0 .00
Table 2.2 Allocation of Initial Investment
A. Business Registration Fees
Registration and Business Requirements Amount
Community Tax Certficate (Cedula) 105.00
Barangay Business Clearance 365.00
Mayor's Permit 1,309.00
Sanitary Permit FREE
BIR 600.00
SEC Registration 1,600.00
Fire Safety Inspection Certificate 163.50
Zoning Clearance FREE
Occupancy Permit 1,600.00
FDA (License to Operate) 1,000.00
Product Registration 250
HALAL Registration 30,000.00
Microbial Analysis and Nutritional Facts Analysis 10,593.00
Label Execution 20,749.00
Total PHP 68,334.50

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B. Renovation Cost
Renovation Costs
Materials Quantity Quantity Price Total Source
Roofing Sheet 3 500.00 1,500.00 Oriental Lingayen
Good Lumber (2x2x8 feet) 12 133.33 1,599.96 Oriental Lingayen
Good Lumber (2x4x8 feet) 1 266.67 266.67 Oriental Lingayen
Good Lumber (2x2x12 feet) 7 200.00 1,400.00 Oriental Lingayen
Marine Plywood (1/4) 6 500.00 3,000.00 Oriental Lingayen
Nail (3 inch in 1 kg.) 1 80.00 80.00 Oriental Lingayen
Nail (1 inch in 1 kg.) 2 50.00 100.00 Oriental Lingayen
Umbrella Nail (1 kg.) 1 70.00 70.00 Oriental Lingayen
Vulca Seal 2 40.25 80.50 CSI Warehouse
Light Bulb (LED) 3 199.75 599.25 CSI Houseware and Appliance Center
Kitchen Faucet 1 50.00 50.00 Oriental Lingayen
PVC Pipe (1/2) 1 70.00 70.00 Oriental Lingayen
PVC Elbow (1/2) 3 18.00 54.00 Oriental Lingayen
Water Tee (1/2) 3 20.00 60.00 Oriental Lingayen
PVC Solvent Cement 1 70.00 70.00 Oriental Lingayen
Orange Pipe Clamp (1/2) 5 3.00 15.00 Oriental Lingayen
Sandpaper 2 10.00 20.00 CSI Warehouse
4 liter semi gloss enamel 3 520.00 1,560.00 CSI Warehouse
1 liter oil wood stain (wallnut) 4 108.00 432.00 CSI Warehouse
Paint Brush 2 264.75 529.50 CSI Warehouse
Paint Roller 2 65.00 130.00 CSI Warehouse
Door Knob 1 235.00 235.00 CSI Warehouse DIY
Exhaust Fan (14 inch) 1 941.00 941.00 CSI Houseware and Appliance Center
Construction Labor
Foreman 1 4,950.00 4,950.00
Laborer 1 3,150.00 3,150.00
Paint Labor 2 9,000.00 18,000.00
Fire Extinguisher 1 1,600.00 1,600.00
Total 40,562.88

C. Marketing Expenses

Marketing Expenses Explaination Year 1

Boosting Facebook Page 2,500.00 per month PHP 12,500.00
What's Up Dagupan? 1,000 per month PHP 4,000.00
Product Samples 10 packs of Royal Shots Chili Oil 690
Royale Plus 10 packs of Royal Bites Chili Garlic Oil 710
48 packs of Royal Shots Chili Oil and 1380
Royal Bites Chili Garlic Oil 1420
Business Cards 100 pieces PHP 650.00
Trade Fairs Participation Php 12,000.00 per event PHP 36,000.00
Sponsorships Php 10,000.00 per event PHP 30,000.00
Total PHP 87,350.00

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D. Capital Assets

Capital Units Price Total Life Source Item

Asset

Double
Door 1 9,050.00 9,050.00 10 Amazon
Dehydrator

Blender 3 903.00 2,709.00 3 CSI Houseware and

Appliance Center

Casserole 3 480.00 1,440.00 3 Dagupan

Commercial

Pan 3 780.00 2,340.00 3 Unitop

Weighing
Scale 4 170.00 680.00 3 Unitop

CSI warehouse
Gas Stove 3 556.00 1,668.00 3

Continuous
Band 1 22,000.00 22,000.00 3 Synergy, Dagupan
Sealer

Heat Gun 2 1,700.00 3,400.00 3 CSI Warehouse

1
Motor
Vehicle 70,000.00 70,000.00 3 Motor Star

Total 113,287.00

Source: Google Images

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E. Kitchen Utensil

Kitchen Units Price Total Life Source Item

Utensil
1
Dagupan
Basin 5 90.00 450.00 Commercial

Funnel 4 15.00 60.00 Unitop

1
Measuring
Materials 4 50.00 200.00 Unitop

1
Kitchen
Scissor 2 50.00 100.00 Unitop

1
Knife
6 40.00 240.00 Unitop

1
Dagupan
Ladle 6 30.00 180.00 Commercial

1
Chopping
Board 4 90.00 360.00 Unitop

Total 1,590.00

Source: Google Images

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F. Other Asset

Asset Units Price Total Life Source Item

Drying 8 200.00 1,600.00 1 Tugos Pons
Net

Plastic 3 40.00 120.00 1 Unitop

Crate

Total 1,720.00

G. Office Equipment

Office Units Price Total Life Source Item

Equipment
Laptop 1 18,000.00 18,000.00 5 PC Market
Centre

Pocket 1 1,000.00 1,000.00 3 PC Market

WiFi Centre

Total 19,000.00

H. Furnitures and Fixtures

Furniture and
Fixtures Units Price Total Life Source Item

Electric Fan (3D

Turbo Power) 2 2,150.00 4,300.00 5

Working Table 3 3,500.00 10,500.00 5

Chair 4 180.00 720.00 5
Total 15,520.00
Source: Google Images

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I. Initial Inventory

Initial Inventory Source Units Price Total

Chili Oil Chili Garlic Oil Inputs Required
227 gram 10 gram 227 gram 10 gram
Siling Labuyo Farmgates at Urdaneta City and Villasis Pangasinan 1440 960 1560 1080 519 80.00 41,520.00
Garlic Farmgate at Bautista Pangasinan 1560 1080 129 120.00 15,480.00
Vegetable Oil Amigos Merchandising 1440 960 1560 1080 45 816.00 36,720.00
Brown Sugar Magic Lingayen 1440 960 1560 1080 90 48 4,320.00
Sodium Benzoate 1440 960 1560 1080 50000 0.011 550.00
227 - gram food jars Synergos Packaging 1440 1560 60 240.00 14,400.00
Sachets Entrepouch 960 1080 48,960 1.00 48,960.00
Sticker for Label 1440 1440 960 100.00 96,000.00
Packaging Boxes 60 40 65 45 210 55.00 11,550.00
Total 269,500.00

J. Rental Fee
The monthly rental expense of the facility area is Php 5,000.00. The agreement of Chili

Royale and the lessor is 1 month advance and 2 months deposit.

G. Economies of Scale

Year 1 Year 2 Year 3 Year 4 Year 5

Chili Oil Chili Garlic Oil Chili Oil Chili Garlic Oil Chili Oil Chili Garlic Oil Chili Oil Chili Garlic Oil Chili Oil Chili Garlic Oil
227 grams 10 grams 227 grams 10 grams 227 grams 10 grams 227 grams 10 grams 227 grams 10 grams 227 grams 10 grams 227 grams 10 grams 227 grams 10 grams 227 grams 10 grams 227 grams 10 grams
DM per unit 61.89 40.27 62.89 41.27 63.13 43.41 64.15 44.43 64.39 44.28 65.43 45.32 65.68 45.16 66.74 46.22 66.99 46.07 68.08 47.15
DL per unit 1.27 0.06 1.27 0.06 1.13 0.05 1.13 0.05 1.08 0.05 1.08 0.05 1.02 0.04 1.02 0.04 0.93 0.04 0.93 0.04
MOH per unit 3.48 0.15 3.48 0.15 3.08 0.14 3.08 0.14 2.95 0.13 2.95 0.13 2.76 0.13 2.76 0.12 2.68 0.12 3.01 0.12
Total 66.65 40.48 67.65 41.48 67.33 43.59 68.35 44.61 68.42 44.46 69.46 45.50 69.46 45.34 70.52 46.39 70.61 46.23 72.02 47.31

Based on the table above, Chili Royale experienced economies of scale during its five

years of operation. The direct labor per unit decreases through time which speaks to the

specialization of work of the staffs leading into efficiency in the business. Other than the direct

labor, manufacturing overhead per unit also decreases with time. Signaling the business to

continue increasing the production. On the other hand, the direct material per unit increases

because of the 2% inflation adjustment made every year.

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Economies of Scale

100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Year 1 Year 2 Year 3 Year 4 Year 5

Royal Shots (Qty) Royal Bites(Qty)

Economies of scale is also evident with an increase in input corresponding to the

increase in output. As shown on the chart above, the number of Royal Shots and Royal Bites

increases relative to the increase in the quantity of inputs.

Year 1 Year 2 Year 3 Year 4 Year 5

Manufacturing Overhead 170,014.448 240,261.414 246,869.169 254,543.064 280,002.008
Total Operating Expenses 646,956.726 778,482.381 843,721.782 909,079.413 996,953.126
Total Fixed Cost 816,971.174 1,018,743.795 1,090,590.951 1,163,622.477 1,276,955.133
Table 5.5: Total Fixed Cost

Having economies of scale is a cost advantage as the production of output increases. As

the quantity of production increases, fixed cost per unit decreases which means total costs

decrease as well. The economies of scale of the business will continue for some time until it

reaches its peak quantity of production

CHILI OIL
Year 1 Year 2 Year 3 Year 4 Year 5
Total Fixed Cost 816,971.174 1,018,743.795 1,090,590.951 1,163,622.477 1,276,955.133
Weighted CM 15.34 14.82 14.86 14.81 15.32
Composite Breakeven 53,259 68,730 73,412 78,567 83,341
Breakeven units (227 g) 17,256 20,963 21,216 21,685 23,419
Breakeven units (10 g) 8,894 11,340 13,655 15,399 16,668

Table 5.6: Chili Oil Breakeven Units

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Royal Shots’ chili oil number of units to breakeven for its 227 grams food jar container is

17,256, 20,963, 21,216, 21,685 and 23,419, respectively. On the other hand, the number of

units to breakeven for the 10 grams sachet container is 8,894, 11,340, 13,655, 15,399

and16,668, respectively.

CHILI GARLIC OIL

Year 1 Year 2 Year 3 Year 4 Year 5
Total Fixed Cost 816,971.174 1,018,743.795 1,090,590.951 1,163,622.477 1,276,955.133
Weighted CM 15.98 16.72 16.65 16.84 16.95
Composite Breakeven 51,125 60,941 65,500 69,079 75,320
Breakeven units (227 g) 16,667 19,928 20,502 21,276 22,671
Breakeven units (10 g) 9,356 12,310 13,886 15,197 16,495

Table 5.7: Chili Garlic Oil Breakeven Units

Royal Bites’ chili garlic oil number of units to breakeven for its 227 grams food jar

container is 16,667, 19,9287, 20,502, 21,276 and 22,671, respectively. On the other hand, the

number of units to breakeven for the 10 grams sachet container is 9,356, 12,310, 13,886,

15,197 and 16,495, respectively.

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Egyab, C.T, Mayrina, M.C, Bautista, M.C, Dela Cruz, R.M, Erasmo, A.N, Poscablo, A.M, Villanueva, W.M