Question

Mountaintop golf course is planning for the coming season. Investors would like to earn a profit of $5,640,000 (a 12% return on the company's $47,000,000 of assets). About 440,000 golfers are expected each year, with a projected FC's of $20,000,000 and VC's of $17 per golfer. They have a favorable reputation in the area sp they have some control over the price of a round golf ball. Using a cost-plus approach, what price should be charged for a round golf ball?

a. $62.45

b. $119.64

c. $17.00

d. $75.27

Answer 1

Fixed Costs	$ 20,000,000
Variable Costs	$ 7,480,000	=17*440000
Desired Profit	$ 5,640,000
Price should be charged for a round golf ball	$ 75.27	=(20000000+7480000+5640000)/440000
Correct answer is option d .