Question

COMPUTE THE CONTRIBUTION MARGIN BASED ON EACH SERVICE

Grooming Day Care Boarding

Sales Price

Variable Cost Per Unit

Contribution Margin

Total Variable costs for:

Grooming $9.97

Day Care $4.74

Boarding $7.36

? 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.

? Dog Day Care

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.

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

.

Answer 1

1. Dog Day Care	Selling Price	Variable cost per unit	Contribution margin per unit = SP - VC	# of Dogs	Total Contribution margin
a	$18.00	$4.74	$13.26	22	$291.72
b	$20.00	$4.74	$15.26	15	$228.90
c	$25.00	$4.74	$20.26	10	$202.60
2. Overnight boarding	Selling Price	Variable cost per unit	Contribution margin per unit = SP - VC	# of Dogs	Total Contribution margin
a	$25.00	$7.36	$17.64	12	$211.68
b	$28.00	$7.36	$20.64	10	$206.40
c	$30.00	$7.36	$22.64	7	$158.48
3. Basic Groom	Selling Price	Variable cost per unit	Contribution margin per unit = SP - VC	# of Dogs	Total Contribution margin
a	$25.00	$9.97	$15.03	5	$75.15
b	$30.00	$9.97	$20.03	4	$80.12
c	$35.00	$9.97	$25.03	3	$75.09

Fixed Cost detail not Provided , hence Break-Even can not be calculated.