4.

1 Assumptions

1. Operation shall commence at August 1, 2018. Financial statements are

forecasted for five years and five months ending December 31 of the year

using the calendar year.

2. Raw materials include take- out boxes (Php 3/ each) purchased and the

normal spoilage accounted for, both of which are to be absorbed by the

company.

3. Normal spoilage is assumed to be 1% of the total direct materials related to

dishes used.

4. First In First out (FIFO) system will be adopted as method of inventory.

5. It is assumed that 90% of the purchased annual office and store supplies will

be used.

6. For simplicity purposes, all assets will be depreciated using a straight line

method.

7. Only 60% of the total cost of take- out box will be paid through cash. The

40% will be the accounts payable the following month of purchase.

8. Utilities expense not included in the manufacturing overhead is accounted

as 70% selling expense and 30% general and administrative expense.

Ending Utilities Payable is equal to a one month utilities expense of the year.

9. Cut-off date for payroll computation is every 12th and 27th of the month.

10. Salaries and wages are to be paid every 15th and 30th day of the month.

Hence, salaries and wages for four (4) working days will be accrued.

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11. Employers’ contributions to SSS, Phil Health and HDMF is based on their

respective computation tables and is payable every 10th day of the

succeeding month.

12. Only the salaries and wages, premiums and employee benefits paid by the

company for servers and cashier will be considered as selling expense.

13. Salaries and wages, premiums and employee benefits increase every year

reflecting the inflation computed.

14. It is assumed that the company would not incur any overtime, retirement and

separation pay.

15. All sales and purchases are inclusive of 12% VAT while payment to rent,

utilities, raw materials, supplies, property, plant and equipment, advertising,

and repairs and maintenance are inclusive of input VAT. VAT is paid every

20th day of the following month where the sales and purchases occurred,

hence, a month of VAT payable is expected every end of accounting period.

16. Direct labor and manufacturing overhead is distributed to product dishes and

drinks. 95% will be allocated to the dishes then the 5% to the drinks.

17. Tax is 30% of net income before taxes as provided for by the National

Internal Revenue Code of the Philippines which is payable quarterly. Income

tax payable consist of the expenses of the last quarter of the period.

18. Annual sales in unit increases with the increase of population and is within

the maximum capacity in terms of seats and in terms of kitchen equipment.

All sales will be on cash basis.

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19. Selling price on each dish varies, and will be based on its unit cost plus a

40% markup. As one of its strategy, all price will be either divisible by 5 or

10, whichever is nearer to the computed cost plus 40%. Unless that

“rounded-off” selling price is still higher than the computed cost-plus amount,

there will be no increase in price for that certain year.

20. There will be a P30 fixed selling price for all kinds of drinks throughout the

5.5 year-operation.

21. The change in selling price is due to inflationary increase of the components

of cost of goods sold, and, such increase is assumed to have no material

effect on the projected demand on the products as disposable income of the

target population increases as well.

22. Cost of goods sold, utilities expense excluding internet connection, store

supplies expense, office supplies expense, repairs and maintenance

expense, and miscellaneous expense increase with inflation rate.

23. Inflation rate for the next few years is computed by means of the 5- year

historical inflation rate as provided by the Philippine Statistics Authority using

Moving Average Method. The inflation rate from of 2019 to 2023 is as

follows: 2.9, 2.66, 2.912, 3.134 and 3.121.

24. Quarterly rent of ₱300,000 is to be paid on the first day of each quarter. A

two-month deposit for rent worth ₱200,000 is to be tendered at the beginning

of the lease term and to be refunded at the end of the lease contract.

25. Repairs and maintenance is the 5% of the total net of vat cost of production

machineries and equipment, 1% of the LED furniture and fixtures (as per

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 expected supplier’s estimate), 3% of the leasehold improvement net of vat

(as per architect’s estimate), 5% of the office equipment and 5% of the other

non-current assets.

26. Depreciation of production assets are allocated wholly to the product; store

equipment, furniture and fixture to selling expense; and office equipment,

furniture and fixture to administrative expense. Depreciation of other non-

current asset and leasehold improvement will be apportioned among

production cost, selling expense and administrative expense according to

the percentage of area of the kitchen, store and office.

27. The company established a Php 3,000 threshold for its Property, Plant and

Equipment. Machineries, furniture and fixtures, and other related assets not

qualified for the said threshold is included in the miscellaneous expense.

28. Net income is to be shared equally by the partners.

29. All partners will apportion and withdraw varying amount of cash every year-

end.

30. Audit fee is P18,000.00 for the first audit engagement and P15,000.00 for

the succeeding years.

31. The registration of trademark costs P6,480 and no impairment loss is

assumed.

32. The discount rate used for computing the present value of cash flows is 10%,

as provided by National Economic Development Authority (NEDA).

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