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DESCRIPTIONa rough draft of our research paper in microeconomics
Ateneo de Naga UniversityDepartment of Social Science
InstructorMr. Manny Abejero
Submitted by:Bico, Yentl
Arellano, Jessica R.
BECM214-Advanced microeconomics N11st Semester, S/Y 2013-2014
INTRODUCTIONThis study aims to provide means of producing wine at a cheaper cost and high revenue.
The scope of the study starts from the collection of raw materials which is fresh pineapple fruit and be able to convert such fruits to a wine called pineapple wine. The study also includes the treatment of the waste materials produced from the process.
Name and Logo of the Product
Bicollano Pineapple Wine Corporation
The company’s objectives include the following:
• To increase profit by producing pineapple wine from pineapple at a reasonable but
• profitable price.
• To be locally and globally, competitive in terms of quality, price, and service.
• Be able to contribute in the economic status of Naga City
STATEMENT OF THE COMPANY
• To manufacture, distribute, and sell, ready at all times to add or modify production in accordance with the changes in the market.
• To sufficiently generate revenue that will ensure an adequate company growth rate and also increasing profit.
• To maintain the highest ethical standards in the conduct of the business.
• To facilitate both personal and professional development of employees.
• To be socially and environmentally responsible
SIGNIFICANCE OF THE STUDY
This study may be beneficial for the following persons:
The business-oriented persons. This study may give them insights on establishing
pineapple Industry in BICOL as a good income-generating business. The results may also help
them in considering Daet, Camarines Norteas where pineapple plantation is as a the business-
friendly urban place where they could start their planned business.
The pineapple farmers. This study may help them in understanding that their pineapple
plantations could also be used for production of wine and not only traditional products
(pineapple juice, pinapple jam,, etc). They could maximize the use of their coconut plantations in
producing pineapple wine.
The alcoholic drinkers. This study may encourage them to choose Philippine products
like pineapple wine instead of other branded alcoholic beverages. Pineapple is not only the
cheap, but it is also has healthy effects for your body). And also, if pineapple wine is readily
available in Daet , it would be easier to buy and much cheaper than other pineapple wine brands
The government officials. This study may provide them awareness on the current
performance of the pineapple industry that should be given more focus since the Philippines is a
tropical country and they could make use other than coconut which is pineaple. It could also aid
in formulation of laws regarding the industry.
The future researchers. This study may give them information and insight on the
pineapple wine industry and its feasibility within Bicol and neighboring areas. This may also
enlighten them with new ideas concerning the industry that may help in boosting the country’s
THE INDUSTRY AND ITS ANALYSIS
This chapter discusses profile of the major players in the Philippines’ pineapple wine industry. It
discusses their services, the market, performance, the services they provide to their clients. It also
includes the identification of government agencies concerned and an analysis of the strengths,
weaknesses, opportunities and threats, and key success factors of the pineapple wine industry.
The worldwide production of pineapple reached in 2001 the amount of 14 million tons. 1,6
million tons have been cultivated in the Philippines, which takes now ranking place 2 in the
world production after Thailand ( 2,3 million ). Also ranking place 2 with 21 % has the pineapple
production in domestic agricultural production of fruits and nuts - behind the cultivation of
banana (62%). The pineapple cultivated area in the Philippines is estimated at round about
44,000 hectares. More than seventy % of these areas are situated in the provinces of Northern
and South-Mindanao. About 30 % of pineapple production is exported, one third as fresh fruit
export, two third as processed fruits
Today, the country produced 648.78 thousand mt of pineapples this quarter or 1.1 percent higher
than the 641.72 thousand mt output in 2013.
The increase in production was brought about by the following:
more area harvested in Central Visayas, Northern Mindanao and Central Luzon; bigger
fruits developed in Ilocos and Davao regions; increased in yields in ARMM and Cagayan
Valley due to proper application of fertilizer; and, induced fruiting stage caused by
extended hot weather in MIMAROPA.The top producers were Northern Mindanao,
SOCCSKSARGEN, CALABARZON and Bicol Region with a combined share of 91.7 %
to the national pineapple production.
In recent years, the product has been launched onto the world market, and it is hoped that this
industry will grow. This would, however, necessitate the planting of more pineapple , since
production is dependent upon the amount of fruit collected every harvesting season.
As far as the environment is concerned, the pineapple industry does not pose any major
threats, since it is in their best interests to encourage more pineapple planting. Both the product
and the process do not include any harmful chemicals; in fact, it is being marketed as an organic
In the Philippines Camarines Norte ranks fourth nationwide in terms of area planted to
pineapple. Bukidnon is number one with 16,000 hectares, followed by South Cotabato at
10,100 and Cavite, 5,000. The province's prime agricultural product is the "Queen of Formosa"
pineapple. Noted for its sweetness and flavor, this kind of pineapple is produced only in
Camarines Norte, thereby making it a specialty in the province.
DEMAND FOR WINE
Historical Supply and Demand of Wine
a 14,000,000.00 Demand
n 12,000,000.00 Supply
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Alcohol Drinking Among Filipinos (WHO, 2004; DOH-UP, 2001)
Total recorded per capita consumption of Filipinos is 3.75 litres of pure alcohol for those litres of
pure alcohol for those 15 years and above years and above and increases by 10% every year
(Filipinos only third to Thailand and Japan).
A 21 year projection starting from the years were data’s are not available to compensate in the projection the years that was referring to was from 2000-2004 on where the insufficient records from the NSO was not available. As you can see there is a growing demand for wine here in the Philippines. Although the Statistical Parabolic Method obtained the lowest standard deviation was not used due to the fact that after the year 2014 there will be a negative demand for wine which is not true for there will always be a demand for wine and using this method can’t be relied upon. Thus, the next lowest standard deviation from the method of projection was adopted for this study which is the Arithmetic Straight Line.
FACTORS AFFECTING DEMAND FOR WINE
Consumption of alcohol
38.9% of Filipinos are occasional alcohol drinkers, 11.1% are regular drinkers (13% males and
5.9% females) while females) while 4.8% are heavy drinkers ( % are heavy drinkers(6.6% males
and % males and1.3% females) though children.Filipino drinkers drink beer (78.5%) q , liquor--
rum, gin, whisky and lambanog (70.6%), and wine, tuba, sangria, sherry (42.4%) .Filipinos drink
to socialize (45.5%), to remove stress and burden (23.8%), or just be happy and gain pleasure
(17.5%).60% of Filipino youth ages 13 years and above have taken or are taking alcoholic
beverages—79% males and 21% females. Figures for moderate and heavy drinkers among the
young and women from 2001-2004 are found to be increasing, still with more males at males at
66.6% and women slowly catching up at % and women slowly catching up at 33.4%.Drinking is
still more acceptable among males among the young, and those likely to drink are those who are
not living with their and those likely to drink are those who are not living with their parents,
whose parents approve of drinking, who frequent social gatherings or parties, bars and discos and
those who do not normally take part in any sport activity.
DRINKING AS A TRADITION
Alcohol drinking has been traditionally associated with happiness, success, thrill and sexual
prowess, especially for the males contemporary images of the young and for the males,
contemporary images of the young andthe women emerging.Alcohol is projected as part of the
day-to-day lives as portrayed in soap operas, basketball leagues, comedy shows and music video
FASHION AND TASTE
Taste of people affects the demand of a commodity.
other (except grapes)PINEAPPLE
CHANGES IN POPULATION
An increase in population will result in a rise in demand and vice versa.
IndicatorsLatest Data Compared to
Percent ChangeReference Period Value Reference Period Value
Total Population May 1, 2010 5,420,411 Aug. 1, 2007 5,106,160 6.2
- Albay May 1, 2010 1,233,432 Aug. 1, 2007 1,187,185 3.9
- Camarines Norte May 1, 2010 542,915 Aug. 1, 2007 513,785 5.7
- Camarines Sur May 1, 2010 1,693,821 Aug. 1, 2007 1,822,371 7.6
- Catanduanes May 1, 2010 246,300 Aug. 1, 2007 232,757 5.8
- Masbate May 1, 2010 834,650 Aug. 1, 2007 768,939 8.5
- Sorsogon May 1, 2010 740,743 Aug. 1, 2007 709,673 4.4
- Iriga City May 1, 2010 105,919 Aug. 1, 2007 97,983 8.1
- Legazpi City May 1, 2010 182,201 Aug. 1, 2007 175,843 3.6
- Ligao City May 1, 2010 104,914 Aug. 1, 2007 101,179 3.7
- Masbate City May 1, 2010 85,227 Aug. 1, 2007 81,585 4.5
- Naga City May 1, 2010 174,931 Aug. 1, 2007 160,516 9.0
- Sorsogon City May 1, 2010 155,144 Aug. 1, 2007 151,454 2.4
- Tabaco City May 1, 2010 125,083 Aug. 1, 2007 123,513 1.3
Population Growth Rate May 1, 2010 1.46 Aug. 1, 2007 1.19 0.3
Population Density(persons per sq.km.)
May 1, 2010 298.8 Aug. 1, 2007 281.5 6.2
Number of Households May 1, 2010 1,111,753 Aug. 1, 2007 1,024,215 8.5
Household Size May 1, 2010 4.87 Aug. 1, 2007 4.98 (2.3)
Number of Occupied Housing Units May 1, 2010 1,102,228 Aug. 1, 2007 1,016,058 8.5
CHANGE IN PEOPLE’S INCOME
More the people earn the more they will spend and thus the demand will rise. A fall in income
will see a fall in demand.
Statistical SeriesLatest Data Compared to Percent
ChangeReference Period Value Reference Period Value
- Total (Million Pesos) 2009 162,567 2006 126,422 28.6
- Average (Thousand Pesos) 2009 152 2006 125 21.5
- Total (Million Pesos) 2009 146,595 2006 111,590 31.4
- Average (Thousand Pesos) 2009 137 2006 110 24.5
Annual Per Capita PovertyThreshold (Pesos)
2009 17,146 2006 13,645 25.7
Poverty Incidence (Percent)
- Families 2009 36.0 2006 36.1 -0.1
- Population 2009 45.1 2006 45.2 -0.1
Consumer Price Index (2006=100)
Region V 2012 132.4 2011 128.8 2.8
- Albay 2012 126.8 2011 124.4 1.9
- Camarines Norte 2012 132.0 2011 128.9 2.4
- Camarines Sur 2012 132.1 2011 127.6 3.4
- Catanduanes 2012 137.8 2011 134.8 2.2
- Masbate 2012 138.6 2011 134.2 3.3
- Sorsogon 2012 134.7 2011 131.2 2.7
Since an advertisement or Ad is anything that draws good attention towards these things. It is
usually designed by an identified sponsor, and performed through a variety of media. Ads appear
on television, as well as radio, newspapers, magazines and as billboards in streets and cities.
Through the use of these, people will tend to to buy our products, by showing them the good
rather than bad of our products.
FACTORS AFFECTING SUPPLY OF WINE
Manufacturing of beer and liquors is one of the most profitable industries in the Philippines. Four
of its manufacturing companies i.e. San Miguel Corporation, Tanduay Distillers, Ginebra San
Miguel and Asia Brewery has been consistently among the top and Asia Brewery has been
consistently among the top 75 among the top 1000 corporations in the country.Despite recorded
economic downturn and gloomy outlook for the Despite recorded economic downturn and
gloomy outlook for the Philippine economy, sales and consumption of alcoholic drinks are found
to remain high and are projected to expand positively. This is due largely to the increasing
disposable incomes among the youngand the emerging influence of Western pub drinking.
Massive and aggressive advertising helps the alcohol industrachieve its optimum sales where
80% of cost for every bottle is spent on advertising (Health Action Information Network, 2004).
The Price of Inputs
In addition to the price of the product which is the pineapple wine being the main factor as stated
in the Law of Supply, the price of production inputs of making this product also plays a part. The
lowest price at which a firm can sell a good without losing money is the amount of money that it
costs to produce it. Producing a good or service involves taking inputs and applying a process to
them to produce an output. The output is the finished good or service, and inputs are raw
materials, labor, utilities, licensing fees, or even other goods. These inputs are also known as
factors of production. If the price of inputs goes up, the cost of producing the good increases.
And therefore at each price producers need to sell their good for more money. So an increase in
the price of inputs leads to a decrease in supply. Simarly, a decrease in the price of inputs leads
to an increase in supply.
The Current State of Production Technology
Production of a good involves taking inputs, applying a process to them, and producing an
output. Well, production technology is involved in the process part. Increases in the level of
production technology can make that process more efficient. When you invest for the latest
production technology, the operation becomes more efficient and you are able increase the
supply of pineapple wine. If we decided to expand further and add more technological advanced
machines the improvements will be guaranteed .This further increases your ability to supply
Pineapple Wine since it reduces your labor costs. By automating the process, reliance upon
labor is lessened and those resources are released for utilization elsewhere.
The Producer's Expectations
It doesn't just matter what is currently going on - one's expectations can also affect how much of
a product one is willing and able to sell. Due to expected occasions like Christmas, Valentine’s
day, New year there will be an expectation of an increase in demand of wines during this
seasons. The tendency of supplier is to increase the current supply for wine because of what
they EXPECT to happen in the future.
THE TYPE OF COMPETITION ( a Monopolistic Competition)
As more or fewer producers enter the market this has a direct effect on the amount of a product
that producers (in general) are willing and able to sell. More competition usually means a
reduction in supply, while less competition gives the producer a opportunity to have a bigger
market share with a larger supply. Since BICOLLANO COMPANY is not just the only seller of
wine in the business, the company is in a monopolistic competition. We sell differentiated
products that are somewhat different, or are perceived to differ, even though we serve a similar
purpose to other companies in the wine industry. We created a differentiated product by quality
style, convenience, location, and brand name through it buyers will tend to switch and buy our
product. By making consumers aware of product differences, sellers exert some control over
COST OF MAKING PINEAPPLE WINE
Operating and Fixed Costs
Variable operating costs were separated into the following eight categories:
• Taxes and fees
• Full- and part-time labour
• Utilities, office supplies, and miscellaneous
Fixed operating costs were separated into the following six categories:
• Property tax
• Loan interest expense
• Cost of equity
Queen or Formosa variety, a small-sized sweet-tasting fruit t weighs to about 0.45 to 0.95 kilogram. The farm gate price of fresh pineapple fruit is Php 4 per piece and is sold at about Php 6 per piece in the market. We , the Bicollano Pineapple Wine Corporation is able to get our own supplier wherein we can buy 3 pesos per piece weighing 0.95 K.
Packaging costs, including bottles, labels, corks were gathered by surveying several suppliers. The lowest quote for the packaging products was used to determine total packaging costs.
500ml wine bottle container cost 8 pesos per piece from our supplier Zibo Chuangyou International Trade Co., Ltd. which they provide the cork and the label for our product.
Taxes and fees
According to the REPUBLIC ACT NO. 6956 Sec. 139. Wines. — On wines there shall be collected per liter of volume capacity the following taxes:chanroblesvirtualawlibrary
"(a) Sparkling wines regardless of proof, Twenty-six pesos; chan robles virtual law library
"(b) Still wines containing fourteen percent (14%) of alcohol by volume or less, Three pesos; and
"(c) Still wines containing more than fourteen percent (14%) of alcohol by volume, Eight pesos.
"Fortified wines containing more than twenty-five percent (25%) of alcohol by volume shall be taxed as distilled spirits. Fortified wines shall mean natural wines to which distilled spirits are added to increase their alcoholic strength."
Our pineapple wine only have 10.6 % alcohol content which means that we have to pay 3 pesos by volume.
Verify and reserve the company name with the Securities and Exchange Commission (SEC)
PHP 40,Notarize articles of incorporation and treasurer's affidavit at the notary php 500,Register the company with the
SEC and receive pre-registered Taxpayer Identification Number (TIN) Cost: (PHP 2,066.14 filing fee equivalent to 1/5 of 1% of the authorized capital stock or the subscription price of the subscribed capital stock, whichever is higher but not less than PHP 1,000 + PHP 19.26 legal research fee (LRF) equivalent to 1% of filing fee but not less than PHP 10 + PHP 500 By-laws + PHP 150 for registration of stock and transfer book (STB) required for new corporations + PHP 320 STB + PHP 10 legal research fee for the By-laws),Pay the annual community tax and obtain the community tax
certificate (CTC) from the City Treasurer's Office (CTO) PHP 500 ,Obtain the business permit to operate from the
BPLO Cost: (PHP 2,408.05 business tax (25% of 1% of paid-up capital) + PHP 200 mayor’s permit + PHP 150 sanitary inspection fee + PHP 50 signboard fee + PHP 300 business plate + PHP 100 QCBRB + PHP 545 zoning clearance + PHP 1,300 garbage fee+ PHP 300 FSIC (10% of all regulatory fees,Apply for Certificate of Registration (COR) and TIN at the Bureau of Internal Revenue
(BIR) PHP 100 (certification fee) and PHP 15 (documentary stamp tax, in loose form to be attached to Form 2303),Pay the registration fee and documentary stamp taxes (DST) at the AAB The rate of documentary stamp tax on original issuance of shares of stock shall be PHP 1.00 for every PHP
200.00 or fractional part thereof, of the par value, of such shares of stock,Print receipts and invoices at
BIR PHP 3,500
We found that wineries spend an average of 100 pesos per case for marketingwholesale wine.
TABLE 1 Summary of Winery Labor Requirements and annual Costs (Php) by Position and Winery Size
2014 2016 2018 2020 2022
2,000 Cases 5,000 Cases 10,000 Cases 15,000 Cases 20,000 CasesFull timeGeneral Manager 760,913.88 1,107,801.09 1,218,581.2 1,273,971.255Winemaker 716,154.24 886,240.87 951,142.35 1,046,256.585 1093,813.7Assistant winemaker 740,772.04 851,887.85Cellerman 494,146.425 617,683.03 679,451.335 710,335.485Warehouse 499,741.38 522,456.9Public Relations 915,334.64Customer Service 706530.915 738,645.96Sales Manager 1063486.045 1,111,829.46Office Manager 557,272.52 612983.27 715,482.845Clerical 566,209.445Total Full-Time Labor 716,154.24 2,141,301.18 3,233,883.99 6,567,805.775 8,499,967.535Part-TimeClerical 209,475.115 209,475.115Customer Service 209,475.115 418,950.23 418,950.23 628,425.345Total Part-Time Labor 209,475.115 418,950.23 418,950.23 418,950.23 628,425.345TOTAL LABOR 925,629.355 2,560,251.41 3,652,834.22 6,986,756.005 9,128,392.88
shows the estimated labor cost in every job position. In a small scale winery which produces
only 2,000 cases of pineapple wine general manager, assistant wine maker, celleran ,
warehouse ,public relations, customer service, sales manager, office manager, clerical and
customer care is not part of the labor requirements. As the number of targeted production
increases the need for workers and those highly skilled is a must to sustain and to deliver quality
products due to increase in production.
TABLE 2:Total, Variable, and Fixed Costs by Winery Size
2014 2016 2018 2020 2022Variable Cost 2,000 Cases 5,000 Cases 10,000 Cases 15,000 Cases 20,000 Cases
Pineapple 737,908.095 1,845,915.675 3,693,815.99 5,540,723.87 7,387,631.75Cooperage 828,716.785 2,073,078.435 4,146,156.92 6,219,235.265 8,292,313.61
Packaging 1,101,980.415 32,756,661.45 5,513,322.9 8,269,984,35 11,026,645.8Mobile Bottling 191,574.05 455,828.105 1,783,079.292 1,305,308.145 1,721,601.4Taxes and Dues 259,304.1 608,850.31 1,905,345.525 1,755,205.18 2,322,999.515Full Time Labor 716,435.84 2,143,473.115 3,237,164.14 6,574,467.545 8,508,589.11Part Time Labor 209,557.485 419,375.175 419,375.175 419,375.175 629,062.76Marketing 203,834.055 331,436.1 563,169.555 538,197.69 512,569.21Utilities 604,49.275 124,333.985 197,142.175 275,550.995 340,518.305Office Supplies 16,567.58 39,201.41 73,928.315 109,682.74 134,415.12Other 46,120.555 9,9691.215 199,382.43 239,930.99 286,752.255Total Variable Costs 4,372,448.23 1,089,7847.89 2,0840,342.55 3,124,766.95 411,763,098.6Insurance 51,493.825 112,012.6 1,837,00.665 235,226.46 286,752.255Maintenance 22,388.62 59,366.68 105,291.845 151,217.01 192,661.67Property Tax 158,839.645 29,264.29 394,717.84 540,546.82 696,071.165Depreciation 14,489,563.09 2,880,025.5 5,212,509.475 7,556,522.78 10,057,328.41Interest 395,491.85 551,653.32 945,783.54 1,304,807 1,647,491.4Cost of Equity 475,480.72 642,150.54 642,150.54 1,507,798.695 1,933,710.7Total Fixed Costs 2,543,402.23 4,484,472.83 7,484,153.905 1,1296,118.77 14,814,015.61
TOTAL COST 6,918,565.1 1,538,230.72 28,324,496.45 42,543,780.71 55,977,114.15
This table includes all the capital, investment and expenses incurred in production of the wine.
2014Variable Cost 500 ML bottle
Pineapple 30.75Cooperage 34.50
Packaging 46Mobile Bottling 7.99Taxes and Dues 10.80Full Time Labor 29.85Part Time Labor 8.73Marketing 8.50Utilities 2.51Office Supplies 0.70Other 1.92Total Variable Costs 182.19Insurance 2.15Maintenance 0.93Property Tax 6.62Depreciation 603.73Interest 16.48Cost of Equity 19.81Total Fixed Costs 105.96
TOTAL COST 288.27TABLE 3: EXPLICIT COST PER BOTTLE OF PINAPPLE WINE (500Ml)
1st we have computed the total economic cost which includes Total, Variable, Fixed cost and implicit cost amounting P925,694,355 for 2000 cases. To compute the price We also considered the prices of wine from other competitors selling with variety of wine flavours and we found out that it is very much expensive. Therefore we
Revenue – Total Econmic Cost = profit
Our company will be producing only 2,000 cases per month.
YEAR 2,000 Cases
Explicit Costs and Implicit Costs
Economists have classified types of costs as explicit (accounting) costs, and implicit costs.Implicit cost are those that is represented by lost opportunity in the use of a company's own resources, excluding cash. The implicit cost for a firm can be thought of as the opportunity cost related to undertaking a certain project or decision, such as the loss of interest income on funds, or depreciation of machinery used for a capital project.Explicit costs represent clear, obvious cash outflows from a business that reduce its bottom-line profitability. This contrasts with less-tangible expenses such as goodwill amortization, which are not as clear cut regarding their effects on a business's bottom-line value.
The Implicit Cost
-the time and effort that we, as the owner of Bicollano Company, puts into the maintenance of the company, rather than working on expansion of our business, is viewed as an implicit cost of running the business. In corporate finance decisions, implicit costs should always be considered when coming to a decision on how to allocate resources. We also estimate our own time to be worth P25,000 each . we are not paying explicit rent, because we own the building we are operating in. If we would rent it out, however, we could be earning P15,000.
Implicit Cost=25,000 x 2 + 15000=P65,000
The Explicit Cost
-all the cost incurred during the production of our product is considered as an explicit cost.With these expenses, it is easy to see the source of the cash outflow and the business activities to which the expense is attribute. Since we are running a small business and incur the cost ( refer to the table ___) we incurred a total of 6,918,565.1
Explicit Cost= 6,918,565.1
TOTAL ECONOMIC COST=P 65,000+ 6,918,565.1
http://www.philstar.com/agriculture/165676/daet-pineapple-sweetest-world PHILIPPINE LAWS, STATUTES AND CODES - CHAN ROBLES VIRTUAL LAW LIBRARYhttp://www.doingbusiness.org/data/exploreeconomies/philippines/starting-a-businessHealth Action Information Network, 2004http://www.dineshbakshi.com/as-a-level-economics/price-system-theory-of-firm/119-revision-notes/1737-factors-affecting-demandhttp://www.investopedia.com/terms/i/implicitcost.asp