Question

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 II: Your market research indicated the following price ranges as optimal for your area:

Dog Day Care

o With pricing at $18 per dog per day, you can expect to have 22 dogs per day.

o With pricing at $20 per dog per day, you can expect to have 15 dogs per day.

o With pricing at $25 per dog per day, you can expect to have 10 dogs per day.

Overnight Boarding

o With pricing at $25 per dog per day, you can expect to have 12 dogs per day.

o With pricing at $28 per dog per day, you can expect to have 10 dogs per day.

o With pricing at $30 per dog per day, you can expect to have 7 dogs per day.

Basic Groom

o With pricing at $25 per groom, you can expect to do 5 grooms per day.

o With pricing at $30 per groom, you can expect to do 4 grooms per day.

o 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 Break-even

o $417 target profit each month

o $667 target profit each month

Boarding

o Break-even

o $583 target profit each month

o $909 target profit each month

Grooming

o Break-even

o $1,000 target profit each month

o $1,500 target profit each month

Determine your contribution margin per unit and contribution margin ratio

Determine your break-even points for achieving your target profits

Grooming-Total Variable Costs-$9.97; Total Fixed Costs-$2367.92

Day Care-Total Variable Costs-$4.74; Total Fixed Costs- $859.39

Boarding-Total Variable Costs- $7.36; Total Fixed Costs- $ $1,378.99

Answer 1

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	Dog Day Care			Overnight				Basic Groom
Selling Price	18	20	25	25	28	30	25	30	35
Less: Variable Cost	4.74	4.74	4.74	7.36	7.36	7.36	9.97	9.97	9.97
Contribution Margin	13.26	15.26	20.26	17.64	20.64	22.64	15.03	20.03	25.03
Contribution Margin Ratio	74%	76%	81%	71%	74%	75%	60%	67%	72%
Fixed Cost	859.39	859.39	859.39	1378.99	1378.99	1378.99	2367.92	2367.92	2367.92
Break Even (Fixed Cost/CM Ratio)	1,167	1,126	1,060	1,954	1,871	1,827	3,939	3,547	3,311
Target Profit-1 (Fixed Cost+Target Proft)/CM Ratio	1733	1673	1575	2781	2662	2600	5602	5044	4709
Target Profit-2 (Fixed Cost+Target Proft)/CM Ratio	2072	2001	1884	3243	3104	3032	6434	5793	5409
Target Profit	417	417	417	583	583	583	1000	1000	1000
Target Profit	667	667	667	909	909	909	1500	1500	1500