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$)$

$$600$ peryear

Licensing and other annual costs

$$700$ peryear

Hourly wage for hired labor; planned for only $190$ hours per year

$$14$ perhour

Variable costs for food

$$15$ per day perdog

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$)$

$30$ per day

$($b$)$

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, eg$.15\mathrm{.}25$ and estimated cost per dog hour to $3$ decimal places, e$.$g$.$

$15\mathrm{.}256.)$

Target cost per dog hour

per dog hour

Estimated cost per dog hour

$

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$.15\mathrm{.}25.)$

Target cost per dog hour $ per dog hour

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