Question

Rooney Camps, Inc. leases the land on which it builds camp sites. Rooney is considering opening a new site on land that requires $4,350 of rental payment per month. The variable cost of providing service is expected to be $7 per camper. The following chart shows the number of campers Rooney expects for the first year of operation of the new site: Jan. 310 Feb. 340 Mar 350 Apr 370 May 610 June 610 July 750 AUR 760 Oct. 480 Nov. 350 Dec. 420 450 5,800 Required Assuming that Rooney wants to earn $9 per camper, determine the price it should charge for a camp site in February and August. (Do not round intermediate calculations.) Price February (August

Answer 1

part 1

Fixed expense (Rent) = $4,350 per month

Variable cost = $7 per camper

Number of campers in February = 340

Profit per camper = $9

Let Price to be charged = $K per camper

Profit = Sales revenue - Total variable costs - Fixed expenses

340 x 9 = 340 x K - 340 x 7 - 4,350

3,060 = 340K - 2,380 - 4,350

340K = 9,790

K = $28.79 (rounded to two decimals)

or $29 (if rounded to nearest whole dollar)

Price to be charged = $28.79 or $29

Part 2

Fixed expense (Rent) = $4,350 per month

Variable cost = $7 per camper

Number of campers in August = 760

Profit per camper = $9

Let Price to be charged = $K per camper

Profit = Sales revenue - Total variable costs - Fixed expenses

760 x 9 = 760 x K - 760 x 7 - 4,350

6,840 = 760K - 5,320 - 4,350

760K = 16,510

K = $21.72 (rounded to two decimals)

or $22 (if rounded to nearest whole dollar)

Price to be charged = $21.72 or $22

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