# Question

The Sleep-Over Kennel has a capacity of 50 animals and is open 360 days per year. Operating costs of the kennel are as follows:

Annual depreciation

on the building...................................... $18,000

Labor.................................................... $35,000 per year plus $2 per animal per day

Food...................................................... $3 per animal per day

Utilities................................................. $15,000 per year plus $0.25 per animal per day Other (including advertising)............... $22,000 per year plus $0.50 per animal per day

Required:

(a) The kennel has an average annual occupancy rate of 80 percent. Determine the minimum daily charge that must be assessed per animal per day to break even.

(b) The kennel’s tax rate is 25 percent. What must the charge per pet per day be to earn an after-tax income of $38,400? (Round to the nearest dollar.)

(c) The kennel typically has a 1:9 cat-to-dog proportional occupancy. If cat owners are charged $15 per day, what do dog owners need to be charged per day to earn an annual after tax income of $42,000? (Round to the nearest dollar and show proof of your answer.)

(d) The kennel’s owners are considering renovating the kennel area to provide more spacious private rooms for the dog ‘‘guests.’’ The renovation will cost approximately $12,000 and will decrease the number of possible occupants to 30 per day. Cats will still make up 10% of the kennel’s clientele and will be charged $15 per day. What will the kennel now need to charge per dog per day to cover the cost of renovations and still earn an after-tax income of $42,000? (Round to the nearest dollar. Ignore depreciation on renovations.)

(e) The kennel is considering adding a dog obedience school to the kennel services. Costs of the school have been estimated at $3,680 per year for the trainer plus $8 per dog. Kennel owners are planning to charge $40 per dog to attend obedience school, and they want to earn a pretax proﬁt of $8,000 on the school. How many dogs need to attend the school to earn the desired proﬁt?

Annual depreciation

on the building...................................... $18,000

Labor.................................................... $35,000 per year plus $2 per animal per day

Food...................................................... $3 per animal per day

Utilities................................................. $15,000 per year plus $0.25 per animal per day Other (including advertising)............... $22,000 per year plus $0.50 per animal per day

Required:

(a) The kennel has an average annual occupancy rate of 80 percent. Determine the minimum daily charge that must be assessed per animal per day to break even.

(b) The kennel’s tax rate is 25 percent. What must the charge per pet per day be to earn an after-tax income of $38,400? (Round to the nearest dollar.)

(c) The kennel typically has a 1:9 cat-to-dog proportional occupancy. If cat owners are charged $15 per day, what do dog owners need to be charged per day to earn an annual after tax income of $42,000? (Round to the nearest dollar and show proof of your answer.)

(d) The kennel’s owners are considering renovating the kennel area to provide more spacious private rooms for the dog ‘‘guests.’’ The renovation will cost approximately $12,000 and will decrease the number of possible occupants to 30 per day. Cats will still make up 10% of the kennel’s clientele and will be charged $15 per day. What will the kennel now need to charge per dog per day to cover the cost of renovations and still earn an after-tax income of $42,000? (Round to the nearest dollar. Ignore depreciation on renovations.)

(e) The kennel is considering adding a dog obedience school to the kennel services. Costs of the school have been estimated at $3,680 per year for the trainer plus $8 per dog. Kennel owners are planning to charge $40 per dog to attend obedience school, and they want to earn a pretax proﬁt of $8,000 on the school. How many dogs need to attend the school to earn the desired proﬁt?

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