Elizabeth and William are considering offering a doggy day-care service. After some research, they found several pet day-care facilities in their area, but they were expensive! Further, the facilities were sterile and didn't provide a "homey" or fun environment for pets. Elizabeth and William felt they could easily fix these shortcomings. Elizabeth's home would be the location for their business, since it already has a fenced-in yard and is located two blocks from a dog park. Estimated costs for building an outdoor shelter, plus other licensing and business start-up costs, are as follows. Shelter (depreciated over 7 years) Licensing and other annual costs Hourly wage for hired labor; planned for only 200 hours per year Variable costs for food Estimated volume of dogs per day (open for business 5 days per week, 50 weeks per year; average length of stay 8 hours per day) $600 per year $700 per year $16 per hour $16 per day per dog 24 per day
Elizabeth and William are considering offering a doggy day-care service. After some research, they found several pet day-care facilities in their area, but they were expensive! Further, the facilities were sterile and didn't provide a "homey" or fun environment for pets. Elizabeth and William felt they could easily fix these shortcomings. Elizabeth's home would be the location for their business, since it already has a fenced-in yard and is located two blocks from a dog park. Estimated costs for building an outdoor shelter, plus other licensing and business start-up costs, are as follows. Shelter (depreciated over 7 years) Licensing and other annual costs Hourly wage for hired labor; planned for only 200 hours per year Variable costs for food Estimated volume of dogs per day (open for business 5 days per week, 50 weeks per year; average length of stay 8 hours per day) $600 per year $700 per year $16 per hour $16 per day per dog 24 per day
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 41P
Related questions
Question
Transcribed Image Text:Elizabeth and William are considering offering a doggy day-care service. After some research, they found several pet day-care
facilities in their area, but they were expensive! Further, the facilities were sterile and didn't provide a "homey" or fun environment for
pets. Elizabeth and William felt they could easily fix these shortcomings.
Elizabeth's home would be the location for their business, since it already has a fenced-in yard and is located two blocks from a dog
park. Estimated costs for building an outdoor shelter, plus other licensing and business start-up costs, are as follows.
Shelter (depreciated over 7 years)
Licensing and other annual costs
Hourly wage for hired labor; planned for only 200 hours per year
Variable costs for food
Estimated volume of dogs per day (open for business 5 days per week, 50
weeks per year; average length of stay 8 hours per day)
$600
per year
$700
per year
$16 per hour
$16
per day per dog.
24 per day
Transcribed Image Text:(b)
* Your answer is incorrect.
Assume that the company employs a target costing approach and that the going rate for doggy day care is $10 per hour. What is
the target cost per dog hour if the two friends require a 25% return on their invested assets, which total $624,000 (including
Elizabeth's home)? (Round answer to 2 decimal places, e.g. 15.25.)
Target cost per dog hour
Estimated cost per dog hour
Target cost per dog hour $
10
16.2
15
per dog hour
How would the target cost and estimated cost per dog hour change if a more accurate estimate of volume is just 10 dogs per day?
(Round target cost per dog hour to 2 decimal places, e.g. 15.25 and estimated cost per dog hour to 3 decimal places, eg. 15.256.)
per dog hour
per dog hour
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Step 1: Decision regarding pricing of a product or the services :
VIEWStep 2: Calculation of Target cost per Dog hour (24 dogs per day)
VIEWStep 3: Calculation of Estimated cost per Dog hour (24 dogs per day)
VIEWStep 4: Calculation of Target cost per Dog hour (10 dogs per day)
VIEWStep 5: Calculation of Estimated cost per Dog hour (10 dogs per day)
VIEWSolution
VIEW
Trending now
This is a popular solution!
Step by step
Solved in 6 steps
Recommended textbooks for you