I forget what book I read this in, but the author recommended compensation of $50 per chicken. He said he's successfully gotten that amount in small claims court.
It's not what you paid, it's what they're worth. You didn't just pay for the chicken, you paid for all the care and feeding that went into them. You are also entitled to be compensated for any meat or eggs from the flock. Plus, there's a difference between having one bird killed and half the flock killed.
I think this guy owes you $900, or you take him to court.
I would also call animal control and report this. Sadly, once a dog kills, it's bound to kill again, and these people are clearly not resposible pet owners.
That all being said, I guess we just can't range our chickens unless our yards are securely fenced. It's a shame, because my birds love to run around the yard, but I did just pull a big huge cat out of my coop because I left the door open. I have no desire to completely fence in my yard, so this is what I have to deal with.
I feel sorry for the dog. It doesn't know any better, and it's not the dog's fault some jerk is it's owner. They don't do the dogs any favors by letting them roam free to be attacked or hit by a car.