Susan and Gary 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. Susan and Gary felt they could easily fix these shortcomings. Susan'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 190 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) (b) Target cost per dog hour Estimated cost per dog hour 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 $540,000 (including Susan's home)? (Round target cost per dog hour to 2 decimal places, e.g. 15.25 and estimated cost per dog hour to 3 decimal places, e.g. 15.256.) Target cost per dog hour $ $ eTextbook and Media $ per dog hour per dog hour $600 $700 per year per year $14 per hour $15 per day per dog How would the target cost and estimated cost per dog hour change if a more accurate estimate of volume is just 7 dogs per day? (Round answer to 2 decimal places, e.g. 15.25.) per dog hour 30 per day
Susan and Gary 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. Susan and Gary felt they could easily fix these shortcomings. Susan'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 190 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) (b) Target cost per dog hour Estimated cost per dog hour 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 $540,000 (including Susan's home)? (Round target cost per dog hour to 2 decimal places, e.g. 15.25 and estimated cost per dog hour to 3 decimal places, e.g. 15.256.) Target cost per dog hour $ $ eTextbook and Media $ per dog hour per dog hour $600 $700 per year per year $14 per hour $15 per day per dog How would the target cost and estimated cost per dog hour change if a more accurate estimate of volume is just 7 dogs per day? (Round answer to 2 decimal places, e.g. 15.25.) per dog hour 30 per day
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 41P
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Transcribed Image Text:Susan and Gary 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. Susan
and Gary felt they could easily fix these shortcomings.
Susan'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 190 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)
(b)
Target cost per dog hour
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 $540,000 (including
Susan's home)? (Round target cost per dog hour to 2 decimal places, e.g. 15.25 and estimated cost per dog hour to 3 decimal places, e.g.
15.256.)
Estimated cost per dog hour
Target cost per dog hour
eTextbook and Media
Save for Later
$
$
$
per dog hour
How would the target cost and estimated cost per dog hour change if a more accurate estimate of volume is just 7 dogs per day?
(Round answer to 2 decimal places, e.g. 15.25.)
per dog hour
$600 per year
$700
per year
$14 per hour
$15 per day per dog
30 per day
per dog hour
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