28 May Question ASSIGNMENT 7: BREAK EVEN ANALYSIS, CH. 10 IN YOUR TE
Question
ASSIGNMENT 7: BREAK EVEN ANALYSIS, CH. 10 IN YOUR TEXT.
- Due May 25 by 9pm
- Points 40
- Submitting a text entry box or a file upload
A PDF of hte assignment is available here: Breakeven Analysis.pdf
For the past ten years, you’ve worked at a PETCO Salon as a dog groomer. You’re thinking of starting your own dog grooming business. You found place you could rent that’s right next to a popular shopping center, and two of your friends (who are also dog groomers) have agreed to work for you.
The problem is that you need to borrow money to start the business and your banker has asked for a break-even analysis. You have prepared the following cost estimates of your first year of operations.
| Fixed Costs | |
| Salaries | $105,000 |
| Rent and Utilities | $36,000 |
| Advertising | $2,000 |
| Equipment | $3,000 |
| Variable Cost per Dog | |
| Shampoo | $2.00 |
| Coat conditioner | $1.50 |
| Pet cologne | $0.75 |
| Dog treats | $1.25 |
| Hair ribbons | $0.50 |
You went online and researched grooming prices in your area. Based on your review, you have decided to charge $32 for each grooming.
Part 1:
- What’s the break even point in units–how many dogs will you need to groom in the first year to break even?
- If you and your two employees groomed dogs five days a week, seven hours a day, fifty weeks a year, how many dogs would each of you need to groom each day? Is this realistic given that it takes one hour to groom a dog?
Part 2:
- If you raised your grooming fee to $38, how many dogs would you need to groom to break even?
- At this new price, how many dogs will each of you have to groom each day (assuming, again, that the three of you groom dogs fifty weeks a year, five days a week, seven hours a day?
Part 3
- Would you start this business?
- What price would you charge to groom a dog?
- How could you lower the break-even point and make the business more profitable?
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