CHAPTER 3

TECHNICAL STUDY

Product Description

It‟s undeniable that rice or „bigas‟ as what we Filipinos call it has been an

important part of our daily meal. Unlike other race and culture, we had it as a practice to

eat meals together with several cups of rice to satisfy our hunger and need for energy

and strength. The „Sinandomeng‟ rice which is the traditional favorite of every Filipino

family has 3 types which are the „‟special, fancy and regular”. The SMPC‟s

„Sinandomeng‟ rice is also called as “lamyong” meaning „old rice‟. When cooked, the rice

grain becomes fairly soft and „maalsa‟. Unlike the commonly bought by people,

„Sinandomeng‟ rice gives a delicious aroma and taste after being cooked. Also, its grains

become soft and smooth.

Product Costing

Table 26 shows the breakdown of the cost of a sack of Sinandomeng Rice.

Table 26
Cost of a Sack of Sinandomeng Rice
Items Amount Quantity Total
Raw Materials Paddy P50 50 kg P 1,000.00
Sack 2.00 1 pc 2.00
Knitting Yarn 0.26 1m 0.26
Labor Costs Operator‟s salary 0.47 14 min. 6.58
Overhead Electricity 3.71 6.67 min 24.75
TOTAL COST P 1,033.59

Cooperative Member’s Benefits

A farmer of Pasibi East, Urbiztondo, Pangasinan sells his harvested sack of

paddy that consist of 50 kilograms for an amount of P 650.00, while the cooperative is
willing to buy the paddy for P 1000.00 per sack (50kg), which will give them a higher

income if they become a member of the cooperative. Another benefit that the

cooperative will give to its member is their share coming from the total net income of the

cooperative in the year of operation.

Table 27
Cooperative Member’s Benefits

Other Buyer SMPC

Selling Price of a sack of
P650.00 P1000.00
harvested paddy

Product Pricing

Table 27 shows the costing of a sack (50 kg) of Sinandomeng Rice.

Table 28
Price of a Sack of Sinandomeng Rice
Items Amount Quantity Total
Raw Materials Paddy P50 50 kg P 1,000.00
Sack 2.00 1 pc 2.00
Knitting Yarn 0.26 1m 0.26
Labor Costs Operator‟s salary 0.47 14 min. 6.58
Overhead Electricity 3.71 6.67 min 24.75
TOTAL COST P 1,033.59
SELLING PRICE 1,650.00
GROSS MARGIN P 616.41

Table 28 shows that a sack (50 kg) of Sinandomeng rice will be sold for

P1,650.00 with the cost of P1033.59 will give a gross margin of P616.41.

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Rice Mill Process

Figure 22 presents the rice mill process of SMP Cooperative.

Separation Whitening
Dehulling
of Paddy of Rice

Finished
Grading
Product

Figure 23
Rice Mill Process
Dehulling

Dehulling or dehusking is a process of removing the hull or shell covering from a

rice kernel. Dehusking is achieved in this machine by passing paddy through rubber

rollers and by friction. Husking generally cannot be done 100% and hence, will still be

having the unhusked kernels. These are separated in a later process and recycled.

Separation of Paddy

In the dehuller, some part of the paddy (about 15%) will escape dehulling. This

dehulled paddy is separated in this machine and recycled to the dehuller.

Whitening of Rice

During whitening and polishing bran layers are removed from the rice. This not

only enhances the appearance of the rice but also increases its shelf life. The bran

removal is best achieved in several steps to ensure evenly milled rice grains with

minimum broken and optimum whiteness. In the whitening process, bran is removed by

36
creating high friction forces between the rice grains. Whitening process results in smooth

rice with an opaque appearance.

Grading

Grading removes brokens from head rice and sorts rice into fractions of different

length. Head rice, brokens and tips are further separated by a sequence of indent

cylinders into fractions of different broken sizes and head rice.

Finished Product

Rice produced by the rice milling machine are now ready for bagging and

packaging.

Business Location

SMP Cooperative Office is located at 226 Pasibi East, Urbiztondo, in the

Province of Pangasinan.

Figure 24 shows the location of the cooperative.

Figure 24
Business Location

37
 The cooperative is to be located in Pasibi East, Urbiztondo, Pangasinan. The

proponents chose the location because the area is just near the rice fields and at the

same time in the residence of the farmers for their convenience.

Business Layout

Figure 25 shows the business layout of the cooperative.

8m

10 m

Figure 25
Business Layout
Legend:
1 - Rice Milling Facility
2 - Comfort Room
3 - Administration Office
4 - Storage

The total area rented for the office and rice milling facility of the cooperative is 80

sq. m enough to shelter the machinery, supplies, and the administrative office of the

cooperative.

38
Production Schedule

Table shows the production timetable from buying of the paddy to the selling of

sacks or rice.

Table 29
Production Timetable

Production Months
Process J F M A M J J A S O N D
Buying

Milling

Selling

The Table 29 above shows the year schedule of the cooperative operations. In

the months of April, August and December, the harvesting of rice grains is conducted.

Following the schedule of rice grain harvest the milling process of the paddy are also

done during those months and the selling of processed rice would also be held.

Raw Materials

After drying the harvested paddy from the field of the farmers, it is now ready for

the milling process. A paddy is a grain still intact with its husk or the rice before

threshing. For the year 2017, 28,000 kilos of rice paddy which is locally harvested of the

farmers from Pangasinan will be the starting input of the production and there is a 15%

increase in the production every year. Aside from the rice paddy, each cavan will use

one rice sack and a knitting yarn to secure the rice sack from unwanted materials and to

keep the rice undamaged.

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 Table 30 presents the total cost of machinery.

Table 30
Machinery

Machinery
Unit Cost Qty. Total Cost

Rice Milling Machine

P80,000.00 1 P80,000.00

Bag Closer

P3,700.00 1 P3,700.00

TOTAL P83,700.00

Table 30 presented that the total cost incurred in procuring the rice milling

machine and the bag closer is P83,700.00. The rice milling machine, with a capacity of

450kg per hour, is expected to be utilized for 10 years while the bag closer with a

capacity of 5-8secs per sack, is to be utilized for 10 years.

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 Table 31 presents the total cost of electronic equipment.

Table 31
Electronic Equipment

Electronic Equipment Unit Cost Qty. Total Cost

Ceiling Fan

P1,850.00 3 P5,550.00

Exhaust Fan

P959.80 2 P1,919.60

Weighing Scale

P4200.00 1 P4200.00

Telephone

P1,000.00 1 P1,000.00

TOTAL P12,669.60

Table 31 presented the total amount incurred for equipment which is P12,669.60.

Equipment includes ceiling fan, exhaust fan, weighing scale and a telephone.

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 Table 32 presents the total cost of furniture and fixtures.

Table 32
Furniture and Fixtures

Furniture and Fixtures Unit Cost Qty. Total Cost

Square Table

P1,599.75 3 P4,799.25

Chair

P150.00 5 P750.00

Office Table

P2,500.00 1 P2,500.00

TOTAL P8,049.25

Table 32 presented the total cost of P8,049.25 incurred for furniture and fixtures.

Furniture and fixtures is comprised of square table, chair, and an office table.

42
Table 33 presents the total cost of supplies.

Table 33
Supplies
Supplies Unit Cost Qty. Total Cost
Bulb

P84.95 3 P254.85

Fluorescent Lamp

P247.75 4 P911.00

Rice Sack

P2.00 600 P1,200.00

Knitting Yarn

P45.00 5 P225.00

Calculator

P230.00 1 P230.00

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Log Book

P45.00 2 P90.00

Ream of Bond Paper

P140.00 1 P140.00

Folder

P5.50 5 P27.50

Ball pen

P5.50 12 P48.00

Wall clock

P135.00 1 P135.00

Padlock

P169.75 4 P679.00

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 Fire Extinguisher

P1,499.75 1 P1,499.75

Broom

P100.00 1 P 100.00

Dustpan

P30.00 1 P30.00

Rags

P1.25 12 P15.00

TOTAL P5,585.10

Table 33 presented the total cost of P5,585.10 incurred for supplies. Supplies

include bulb, fluorescent lamp, rice sack, knitting yarn, calculator, log book, bond paper,

folder, ball pen, wall clock, padlock, fire extinguisher, broom, dust pan and rags.

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Employee Uniform

SMPC employees together with the manager will use a shirt with the

cooperative‟s logo during work hours.

Figure 26 shows the employees‟ uniform.

Figure 26
Employees’ Uniform
Labor Requirements

People are considered to be the lifeblood of any business organization. They are

very important for the cooperative to operate effectively and efficiently. SMPC will utilize

employees based on the schedule of their shift. In our operation, we need a total number

of manpower: (1) manager, (2) workers, and (1) delivery man. They are the ones who

will perform the functions of the following positions:

Manager 1
Workers 2
Delivery man 1
Total Number 4

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Work Schedule

Cooperative Store Hours:

o The cooperative is open from Monday-Saturday from 8am to 5:00pm.

Hours of Operation:

o 8-10 hours of operation.

Employees working hours

o The employees will be working from 8am-5pm, given a 1hour break

between 12nn and 1:00pm. The operation will be starting at 8:00am, prior

to that there is a 15-minute adjustment period before the start of

operations for their preparation time. In the afternoon there will be a 30

minute post-closing interval before the employees leave the store.

Number of employees in daily operation:

o At least 4 employees are needed in daily operation including personnel

who works in the rice milling operation, delivery services and

cooperative‟s management office.

Table 34 shows the working days schedule of employees of the cooperative.

Table 34
Schedule of Working Days of Employees

NO. OF
EMPLOYEE M T W Th F S
EMPLOYEE

BOARD OF
ON CALL
ADMINIS- DIRECTORS
19
TRATION SECRETARY ON CALL

TREASURER ON CALL

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 AUDIT COMMITTEE ON CALL

ELECTION ON CALL

COMMITTEE

MEDIATION AND ON CALL

CONCILIATION

ETHICS ON CALL

COMMITTEE

MANAGE- GENERAL
1 XX XX XX XX XX XX
MENT MANAGER

EMPLOYEE1 XX XX DO XX XX XX
OPERATIONS 2
EMPLOYEE2 XX XX XX DO XX XX

DELIVERY 1 DELIVERY ON CALL

Legend: XX - On duty
DO - Day Off

Utility Requirements

In putting up business, one must consider the necessary utilization needed for it

to operate efficiently and effectively. Electricity, water, telecommunication costs are

included.

Table 35
Utilities Expense
Utilities Usage
Electricity 500 Kwh/annually
Water 120 cu. Meter/annually
Telecommunication 12 month bill

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Organizational Costs, Business Permits and Licenses

In order for the cooperative to start its operation, it is mandated to comply with

some of the requirements given by the government.

Table 36 shows the organizational costs to be incurred in establishing the

cooperative.

Table 36
Organizational Costs
Organizational Costs Costs
CDA Registration P500.00
Notarization of Articles of Cooperatives 500.00
Miscellaneous Fees 3,685.00
Total Organizational Costs P4,685.00

Table 37 shows the cost to be incurred in applying for permits and licenses in

establishing the cooperative.

Table37
Permits and Licenses
Permits and Licenses Cost
Mayor‟s Permit P2,495.00
Fire 250.00
Garbage 700.00
Brgy. Clearance 200.00
Application fee for NFA 165.00
License fee for Rice Mill Machine 660.00
License fee for Wholesaling and Packaging 6,600.00
Total P11,070.00

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Total Project Cost

The items included in the project costs were the fixed assets purchased at the

start of operation of the SMP Cooperative. Purchases and payments of operating

expenses were for the initial 2-month operation of the cooperative. Working capital was

used as the revolving fund of the cooperative.

Table 38
Total Project Costing

Acquisition of Fixed Asset

Machinery P83,700.00
Electronic Equipment 12,669.60
Furniture and Fixtures 8,049.25
Leasehold Improvement 20,000.00
Total Cost on Fixed Asset P124,418.85
Payment of Operating Expense

Prepaid Rent P6,000.00

Initial Supplies 5,585.10
Purchase of Raw Materials 187,000.00
Advertising 1,500.00
Licenses and Permits 11,070.00
Organizational Costs 4,685.00
Total Cash on Pre-Operating Expenses 215,840.10
Working Capital 159,159.90
Total Project Costs P375,000.00

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