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Marstech Unlimited Solutions & Technology Inc.

Operation Expense Budget Guidelines


For the Year Ending December 31, 2017

I. Introduction

Operating expenses (OPEX) pertain to the normal expenses incurred in operating a


business and are generally charged against the income during the current year.

Listed in the following sections are the expense categories, definitions, and
prevailing market price of some of the most commonly used operating expenses to
serve as a guide in drafting your budget plan.

Indicated amounts are in Pesos and inclusive of all applicable taxes.

The general expense categories are:

A. Employee Cost
B. Materials & Supplies
C. Repairs & Maintenance
D. Purchased Services & Utilities
E. Rent Expenses
F. Insurance
G. Taxes & Licenses
H. Depreciation & Amortization
I. Business Expenses
J. Miscellaneous

All expense items are clustered relative to its category and given its own respective
code to facilitate the charging of accounts.

This guideline is an updated compilation of relevant data and market price pertinent
to the development of the operating expense budgets. This guideline which covers
selected Character of Expenses (CHAREX) will provide Cost Center Administrators
(CCA) ready references aimed at facilitating preparation of their operating expense
budgets and ensuring uniformity of bases. Each of the selected CHAREX enumerated
below includes a brief description of its expense nature.

Budget Administrators or BA (budget preparation, monitoring and control of budget)


are encouraged to be prudent in their preparation of their operating expense
budgets. These budgets should be reflective of the programs and activities deemed
critical and reasonable. BAs should note that their budgets will serve as basis in
projecting the company’s annual operating expenses as well as appropriation of
financial resources.

It is expected that each unit/department head prepares and submits the budget plan
according to CHAREX to Finance.

Note: These guidelines are for budgetary purposes only. The rates and provisions in
our company policy, in case of any difference from rates herein, shall prevail upon
actual consumption / utilization of budget.

Some budget items are to be indicated by Admin. However, estimates for project
activities may indicate their respective amounts as part of their projections.

II. DIFFERENT EXPENSE CATEGORIES

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A. EMPLOYEE COST (Amounts will came from the HR. BA should inform the HR for
any requested additional employee. This is still subject for approval.)

1. Employee Compensation

1001 Salaries and Wages – Regular

1002 Salaries and Wages – Probationary

This covers the straight-time daily pay for an eight-hour day’s work and/or the
rate for a monthly-paid employee without any premium or overtime pay.

Note: HR in coordination with payroll shall provide proposed budget for base
pay for all cost centers to Finance.

1003 Salaries and Wages – Project Based / Casual

1004 Salaries and Wages – Contractual

This covers the straight time daily pay for an eight-hour day’s work of an
employee employed directly by the company for a limited period of time or for a
specific project.

Note: Services provided by independent employment outfits should be


budgeted under CHAREX 4402 (Other Purchased Services).

1005 Salaries and Wages – Apprenticeship / Training

This covers apprentice cost and allowances of student-on-the-job trainees (at


75% minimum wage for affected region or Three hundred Pesos whichever is
applicable).

2. Other Compensation

1101 Director’s Allowance

This covers allowances granted to directors. Shall be budgeted by Admin and


should be charged to their Cost Center.

1102 Clothing / Uniform Allowance

This covers the cost of clothing uniforms that the company provides to its
employees. This shall be budgeted by HR under same cost center where the
employee’s base pay is budgeted.

1103 Other Bonuses and Allowances (this shall by filled up by Admin)

This covers other authorized bonuses and allowances to employees which are
not classified under the specific accounts.

1104 Commission (this shall be filled up by Sales)

The company provides commission to sales employees based on existing policy.

1105 Overtime Pay (this shall be filled up by HR)

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1106 Night Pay (this shall be filled up by HR)

This covers compensation to authorized employees for working in excess of the


minimum 8 hours.

1107 13th Month Pay (this shall be filled up by Admin)

The company (in compliance with the Labor Code) provides 13 th month pay.

3. Personnel Benefits Contribution (1201 – 1305 this shall be filled up by HR)

1201 Insurance Benefits

1202 PAG – IBIG Contributions

1203 PHILHEALTH Contributions

1204 SSS Contributions

This covers the company’s share in the respective premiums.

1301 Employee Recreation Expenses

This covers employee expenses incurred in Company sponsored sports and


recreational activities, Anniversary, Company outing, Christmas and holiday
celebrations.

Expense incurred under this item include but may not be limited to food &
drinks, prizes & other materials, accommodation, transportation and other
expense incurred in relation to the conduct of the said activities.

Budget shall be prepared by HR to be charged under the latter’s cost center.

1302 Monetization of Leave Credits

This covers the remuneration to officers and employees for monetary equivalent
of their unused leave credits.

1303 Medical Benefits

This covers the expenses to be incurred by employees during hospitalization or


out-patient treatment including dental / opthalmologic, etc.

1304 Other Personnel Benefits

This covers amount of benefits not classified under the specific personnel
benefits account.

4. Training and Scholarship Expenses

1401 Training and Education - Local


1402 Training and Education – Foreign

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This covers allowable expenses incurred by an employee, while attending
approved foreign and local manpower development and training programs. For
in-house trainings and seminars, cost of venue, meals, materials and
professional fees shall be charged to this CHAREX by the department
conducting the seminar. Travel expenses are chargeable to CHAREX
6101 - Local Travel. For foreign training programs, these will be subject to the
usual procedures to be validated by HR based on the training needs assessment
of the employee. Final approval of the foreign training will be secured from the
President.

Notes:

1. For in-house regular/programmed seminars by the HR, Finance / Accounting,


Safety, etc. that will address organizational development, HR will be responsible
for budgeting the training expense. For specific or particular training intended for
department, the requisitioning department shall be responsible for budgeting the
training in coordination with HR.

2. For foreign training and/or seminar, HR will provide the budget to Finance for
consolidation and control in appropriate cost centers. Attendance to foreign
training and/or seminars shall be subject to HR’s endorsement and President’s
approval.

B. MATERIALS AND SUPPLIES

1. Fuel, Oil and TBA

2001 Fuel (IFO, ADO, etc.)

This covers cost of gasoline, diesel, oil used in company vehicles and other
equipment.

Type (In Pesos per


litter)
Premium Gasoline 41
Unleaded Gasoline 39
Diesel 27

Notes: Since the cost of oil and gasoline are very erratic, individual cost
centers may use the prevailing rates of fuel at their respective location.

The prices stated above are average and taken as of November 3, 2015.

2002 Lubricants

This covers costs of lubricants and greases used in the company vehicles and
other equipment.

2003 TBA Products (Repairs & Maintenance)

This covers costs of tires, batteries and other accessories used in the company
vehicles and other equipment.

1. Tires/Tubes (prices as of November 3, 2015)

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Specifications Prices (PHP)
a. Radial Passenger Tires (Tubeless)
165/80 R-13 3,250
185/65 R-14 3,200
205/70 R-15 4,450
b. Commercial Tires (Tube Type)
6.4/6.5-13 4,587
7.5-14 5,716
c. Light Truck Tires (Cross Ply/ Bias Belted)
7.00-15 Lug type 6,115
7.00-15 Highway type 5,586
6.50 + 14 8 PR 4,716
8.25 + 16 14 PR 8,056

2. Batteries (prices as of November 3, 2015)

Type Prices (PHP)


Passenger Car
1 – SMF 2,800
2 – SMF 3,000
3 – SMF 3,700
Heavy Trucks
2D 7,350
4D 8,291
8D 10,055

3. Accessories & Specialties (oil filter, engine flush, brake fluids, coolants, etc.)

2. Other Materials and Supplies

2101 Safety Tools & Supplies

This covers cost of gloves, safety shoes, hard hat, mask, safety goggles, etc.

2102 Stationery and Office Supplies

This covers cost of stationery, office supplies. This excludes reproduction costs
(photocopying and mimeographing), micro-computer related supplies and
company official forms which are chargeable to CHAREX 4301, 2111, and 2112,
respectively, to be used by the office employees only.

Cost of calling cards shall be allocated in the department from which it was going
to use. Cost data shall be came from Business Development Department.

Suggested Formula: Computed at Php 3,000.00 per man per year or 2014
actual applied with 5% inflation, whichever is lower, or may opt to submit an
itemized list.

2103 Microcomputer and Photocopier – related Supplies

This covers the cost of microcomputer-related and photocopier supplies such as


printer cartridge ink, toner, USB, general-purpose software, and other computer
supplies, i.e., transparencies.

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Suggested Formula: Computed at Php 1,500.00 per man per year or 2014
actual applied with 5% inflation, whichever is lower, or may opt to submit an
itemized list.

2104 Official Forms

This covers the cost of labor and materials in printing of forms included in the
company’s form register.

Suggested Formula: Use actual amount from 2014 applied with 5% inflation.
Company forms shall be charged under Cost Center 7351 (Admin).

2105 Drugs and Medicines Expenses

This covers cost of drugs and medical expense budget of which is centralized to
Admin under Cost Center 7351.

2106 Other Materials and Supplies

This covers cost of materials and supplies not classified under any of the
CHAREX for “Materials and Supplies”.

C. REPAIRS AND MAINTENANCE

1. General

3001 – 3012 Repairs and Maintenance (R & M)

These are expenses to be incurred to restore an asset to a previous operating


condition or to keep an asset in its current operating condition.

These cover the cost of materials, labor and other expenses classified according
to the asset being repaired identified as follows:

3001 Office Building - Materials


3002 Office Building - Services
3003 Furniture & Fixtures - Materials
3004 Furniture & Fixtures - Services
3005 Office Equipment - Materials
3006 Office Equipment - Services
3007 Motor Vehicles - Materials
3008 Motor Vehicles - Services
3009 Computer Equipment & Software - Materials
3010 Computer Equipment & Software - Services
3011 Other Property and Equipment - Materials
3012 Other Property and Equipment - Services

Notes:

1. Distinguish minor repairs against major repairs:

a. Ordinary repairs are minor replacement of parts, involving small sums


and are frequently encountered. Ordinary repairs shall be charged to
expense when incurred.

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b. Extraordinary or major repairs are matarial replacement of parts,
involving large sums and normally extend the useful life of the asset.
Such expenditures are usually capitalized.

2. Services rendered for particular R & M work, i.e. office building repair,
should be budgeted under the corresponding "R & M services" CHAREX.
Services include contract labor and equipment. For works where labor and
services cannot be segregated, budget categorization shall be under
“Services”.

3. Vehicle preventive maintenance – This is the change oil which include but
may not be limited to oil, filter, fuel filter, tune-up, spark plugs, lubrication
(transmission differential) and greasing.

D. PURCHASED SERVICES AND UTILITIES (to be filled up by Admin unless also


needed by other Cost Center)

1. Professional and Technical Services (Professional Fees)

4001 Legal Services

4002 Auditing Services

4003 Consultancy Services

These are fees and other incidental expenses such as fees and retainers of
appraisers; IT and other professional services.

4004 Janitorial Services

This covers cost of janitorial services and other related services.

4005 Security Services

This covers all expenses associated with the protection of company assets
budget of which is centralized to Admin under Cost Center 7351.

4006 Other Services

This covers cost of other purchased services that are not qualified to be
recognized from CHAREX 4001 to 4005.

Note: Advertising expenses should be budgeted under CHAREX 6401 to


6405. Allowances of student trainees should be budgeted under CHAREX 1005 -
Salaries and Wages – Apprenticeship / Training.

2. Utility Expenses. This covers water and electricity to be budgeted and charged
to Admin.

4101 Water Expenses

Includes bottled water for office consumption and water billings in project sites.

4102 Electricity Expenses

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3. Communication Expenses

4201 Postage and Delivery / Courier Service Expenses

This covers cost of postage, delivery of documents, records, mailing documents


through JRS, FedEx, LBC, and other similar outfits.

4202 Telephone – Landline

This covers the cost of domestic and overseas landline telephone calls including
calls to cellular phones.

Note: When making official calls to cellular phones, proponents are advised
to use a corporate cellular phone unit assigned to authorized employee instead
of a landline. Cell to cell call is cheaper compared to landline to cell.

4203 Telephone Expenses – Mobile

This covers cost of cellular phone calls including domestic and overseas calls.

The monthly mobile phone expense privileges consisting of subscription fee or


cost of prepaid card, as the case may be, is the amount Marstech has
contribution to an entitled employee’s monthly mobile bill.

4204 Internet Expenses

This covers the cost of having internet connections as part of the normal
operation of the business.

4. Printing and Binding Expenses

4301 Mimeographing, Photocopying, Binding, and Outsource


Printing

This covers cost of reproduction, printing and binding of documents such as


drawings, maps, cartographic works, circulars / memos, etc.

E. RENT EXPENSES

This covers the cost of renting office and building space, barracks including
temporary right of way, access road and other real estate, equipment, vehicle
and computer units to meet specific requirements on activities and programs
that could not be accommodated by available company-owned assets.

4501 Building / Office Space / Barracks (shall be budgeted by Admin)

4502 Board Room and Function Room (shall be budgeted by Admin)

4503 Warehouse / Stockyard (shall be budgeted by Admin)

4504 Tools and Equipment

4505 Vehicle

4506 Computer Equipment

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F. INSURANCE

4601 Insurance Expense

This covers the cost of premium paid for insuring company assets against loss,
damage, theft, destruction, fire and injuries to persons.

Admin shall determine the required insurance provisions and will provide data
as to the amount of insurance premium chargeable and centralized to Admin.

G. TAXES AND LICENSES (to be filled up by Admin and Finance)

4701 Real Estate Taxes

This covers real estate and property taxes on land, buildings and improvements.

4702 Occupational Taxes

This covers payments of professional fees of entitled employees that may


include engineers and accountants who are practicing their professions for the
company.

4703 Business Taxes

This covers the following items:

a. Mayor’s permit fee for motor vehicles accessories


b. Basic Corporate Residence Tax
c. Municipal / city license fees

4704 Documentary Stamp Taxes

This covers cost of documentary stamp taxes paid for all negotiable instruments
and legal documents in the company’s name. Documentary stamp expenses not
related to tax shall be under CHAREX 6501 - Documentary Stamp Expenses.

4705 Fringe Benefits Tax

This represents final tax on fringe benefits required under the new
Comprehensive Tax Reform Program.
Note: Payroll / Accounting shall determine and provide HR with the required
budget provision for inclusion in the annual budget.

4706 Motor Vehicle Registration Fees -classified as Taxes &


Licenses-only w/ LTO O.R.-) other than reg. fee expenses like emission test
will be classified under repairs & Maintenance

This covers all fees paid for company-owned vehicles.

For all company-owned vehicles, Admin shall provide budget based on the
following 2015 registration fees:

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Vehicle Age of Vehicles Smoke Emission Test
Type 1 - 5 years Over 5 years For Diesel/Gas Engine
(Php) (Php) (Php)
Light 3,000 3,000 500
Medium 4,000 3,000 500
Heavy 7,500 4,000 500

Plus: Php 100.00 – Sticker Fee


100.00 – Legal Research Fund Fee
280.00 – Computer Fee

4707 Other Taxes, Fees and Licenses

This covers payments to government agencies and instrumentalities not being


covered by the accounts stated above.

H. DEPRECIATION AND AMORTIZATION

To be budgeted by Finance with data coming from Accounting Department.

Depreciation Expense

This represent the cost of depreciation or usage of property and equipment


computed based on acquisition cost divided by its estimated year’s useful
life.

Amortization Expense

This is the cost of using intangible assets that are computed based on
acquisition cost divided by its estimated year’s useful life. This include
amortization of computer software.

I. BUSINESS EXPENSES

1. Traveling Expenses

6101 Local Travel

This covers expenses incurred by employees while travelling on official business


(including availment of local training) within the Philippines (field offices,
barracks, etc.). This includes cost of transportation (bus, jeepney, taxi, boat fare,
and plane tickets), food, accommodation, per diem and other allowable
miscellaneous expenses.

6102 Foreign Travel

This covers expenses while traveling abroad on official business trip other than
foreign training. This includes cost of transportation (bus, taxi, boat fare, and
plane tickets), food, accommodation, personal allowance and other allowable
miscellaneous expenses.

2. Membership Dues and Contributions to Organizations

6201 Membership and Sponsorship

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The Company sponsors and endorses membership in professional and trade
associations, civic organizations and social clubs which may contribute to the
professional and social development of qualified employee and redound to the
benefit of the Company. Membership in said groups should be maintained only if
the employee and his immediate supervisor can ascertain tangible results and/or
is actively engaged in said organization.

Note: The budget for the club memberships should be under the
proponents’ cost centers. HR to provide Finance the approved list of entitled
employees.

3. Representation Expenses

6301 Meeting and Conferences (Company Meetings)

This covers expenses incurred by authorized employees in conference and


meetings with other company employees. This includes cost of food, venue and
other allowable miscellaneous expenses.

As a general guide, the use of said provisions is enjoined to be kept on a modest


basis, as applicable.

Suggested limits on Php per person:

Meals (Lunch/Dinner) P150


Snacks P 75
Whole day meetings (lunch/2 snacks) P300/day

6302 Representation and Entertainment (Business Meetings -


Marketing)

This covers expenses incurred by authorized employees in the nature of


meetings held with non-Marstech staff or officers for the purpose of either
generating sales, in support of marketing efforts, or coordinating/effecting other
sales related activities. Transportation and lodging expenses are chargeable to
CHAREX 6101.

It is suggested that proposed total outlays be limited to the 2014 approved


budget. Suggested limits on meal on Php per person/meeting:

Managers and up 500.00


Supervisors/Staff 300.00
Snacks 100.00

6303 Representation and Entertainment (Business Meetings-Non


Marketing)

This covers expenses incurred by authorized employees in the nature of


meetings held with non-Marstech staff or officers for the purpose of coordinating
or effecting official activities other than marketing efforts.

It is suggested that proposed total outlays be limited to the 2014 approved


budget. Suggested limits on meal on Php per person/meeting:

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Managers and up 500.00
Supervisors/Staff 300.00
Snacks 100.00

4. Advertising Expenses

This covers all expenses incurred in advertising in print, television, radio and
internet primarily to enhance business and commercial interest as well as public
and community relations.

6401 Advertising – Print

6402 Advertising – TV

6403 Advertising – Radio

6404 Advertising – Internet

6405 Advertising – Promotions and Others

This covers all expenses incurred for company promotional items such as
Christmas giveaways including made to order promotional items and company
calendars.

5. Other Business Expenses (Budget shall be provided by Admin under their cost
center)

6501 Documentary Stamp Expenses

This covers documentary stamp issued / used in company transaction.


Documentary stamp taxes are covered by CHAREX 4704 - Documentary Stamp
Taxes.

6502 Community Relation Expenses

This covers cost of social development programs.

MISCELLANEOUS EXPENSES

1. Subscription Expenses

7001 Subscriptions/ Publications

This covers cost of subscription, books, journals and periodicals. This also covers
the cost of bidding notices, legal notices, spaces in telephone directories and
electronic copies.

2. Donations and Contributions

7002 Donations and Contributions

These are the cost of donations and contributions in a form of either monetary or
tangible items given to directly to persons, group of persons, or other
organizations. This does not include facilitation fees.

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3. Other Miscellaneous Expenses

7003 Bank Charges

7004 Miscellaneous Expenses

This includes cost of pantry and household supplies, and other expenses that are
not qualified to be recognized in other accounts.

Miscellaneous expenses with significant amounts and/or regularly incurred


maybe classified to other category of expense. You may ask the assistance of
Accounting Department in categorization of this type of expense.

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