Business

Break Even Analysis Homework Assignment

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: 1. What's the break even point in units--how many dogs will you need to groom in the

first year to break even? 2. 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 a elastic given that it takes one hour to groom a dog?

Part 2: 1. If you raised your grooming fee to $38, how many dogs would you need to groom to

break even? 2. 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 1.Would you start this business? 2.What price would you charge to groom a dog? 3.How could you lower the break-even point and make the business more profitable?

Excerpted from Exploring Business, by Karen Collins. Flat World Knowledge