Mariane Jhiorjette M. Garcia
I. BACKGROUND OF THE STUDY
HONEY DONUTS, INC.
Honey donuts, inc. is a family friend controlled corporation that sells 26 varieties of doughnuts. It started its operation in the Makati area in 1989 with the owner, Mr. Mark Honrado, as general manager. As general manager, he was in charge of purchasing and production while his wife, Susana Honrado, took charge of sales and the coffee shop. Mrs. Honrado was assisted by a sales lady. A part-time accountant reports to the office every Saturday to keep the books.
After its first year of successful operation in Makati, Mr. Honrado was considering to open a branch along katipunan road to tap the students market and another branch within a large shopping mall, at Shoemart, EDSA. For all tree outlets, he was certain that he could still do the purchasing function. Mr. Honrado plans to retain the baking operation in Makati. Baking is done between 11:00 p.m. and 4:00 a.m. daily. He was afraid that the same quality will not be maintained if production is done at the branch level, and more importantly, he was concerned about how he could control costs in all branches if the baking will be done at the branches.
Honey doughnuts make use of four main dough’s namely: sweet dough, angel’s food, yeast raise and munchkin. From these main dough’s, 26 different varieties are produced with differences in icings and fillings only (Exhibit A shows the different product lines.) the comprise 80% of total cost produce doughnut. Selling price is computed at total cost times 1.5.
Mrs. Honrado, likewise, presented another problem related to the opening of new branches. The policy of the company is “Never to sell tomorrow today’s unsold doughnut!” With this policy, Mrs. Honrado asked her husband, “How are we to know the correct number of unsold donuts daily? Is it possible that this figure will be overstated at the...