Question

Overview: In the second milestone of your final project, you will complete your pre-opening strategy. You must analyze the cost behaviors and systems of your industry and then conduct the relevant financial calculations to determine appropriate costing solutions. Be sure to use your work from Milestone One to inform your analysis and proposals Scenario: Prior to Opening, Part lI: Your market research indicated the following price ranges as optimal for your area: Dog Day Care o o o With pricing at $18 per dog per day, you can expect to have 22 dogs per day. With pricing at $20 per dog per day, you can expect to have 15 dogs per day. With pricing at $25 per dog per day, you can expect to have 10 dogs per day. Overnight Boarding o o o With pricing at $25 per dog per day, you can expect to have 12 dogs per day. With pricing at $28 per dog per day, you can expect to have 10 dogs per day. With pricing at $30 per dog per day, you can expect to have 7 dogs per day Basic Groom o o o With pricing at $25 per groom, you can expect to do 5 grooms per day. With pricing at $30 per groom, you can expect to do 4 grooms per day. With pricing at $35 per groom, you can expect to do 3 grooms per day. Additionally, you need to compare your break-even points for the following target profits for each area of your business: Day Care o o o Break-even $417 target profit each month $667 target profit each month Boarding o o o Break-even $583 target profit each month $909 target profit each month

Answer 1

	Day care	Boarding	Grooming
Sales price	18	25	25
Less: variable cost per unit	4.65	7.36	9.97
Contribution margin per unit	13.35	17.64	15.03

	Day care	Boarding	Grooming
Sales price	18	25	25
Fixed costs	858.44	1378.99	2367.92
Contribution margin per unit	13.35	17.64	15.03
Break even units (Fixed cost / contribution margin per unit) (Round up)	65	79	158

	Day care	Boarding	Grooming
Target profit	417	583	1000
Fixed costs	858.44	1378.99	2367.92
Contribution required to earn for achieve target profit (total of above)	1275.44	1961.99	3367.92
Contribution margin per unit	13.35	17.64	15.03
Number of units sold for achieve target profit (round up) (contribution required to earn for achieve target profit / contribution margin per unit)	96	112	225

	Day care	Boarding	Grooming
Target profit	667	909	1500
Fixed costs	1275.44	1961.99	3367.92
Contribution required to earn for achieve target profit (total of above)	1942.44	2870.99	4867.92
Contribution margin per unit	13.35	17.64	15.03
Number of units sold for achieve target profit (round up) (contribution required to earn for achieve target profit / contribution margin per unit)	146	163	324