Question

i More Info Investors would like to earn a 14% return on investment on the company's $183,750,000 of assets. Mount Snow projects fixed costs to be $33,000,000 for the ski season. The resort serves about 725,000 skiers and snowboarders each season. Variable costs are about $12 per guest. Last year, due to its favorable reputation, Mount Snow was a price-setter and was able to charge $3 more per lift ticket than its competitors without a reduction in the number of customers it received. Assume that Mount Snow's reputation has diminished and other resorts in the vicinity are charging only $90 per lift ticket. Mount Snow has become a price-taker and will not be able to charge more than its competitors. At the market price, Mount Snow managers believe they will still serve 725,000 skiers and snowboarders each season. Print Done

Answer 1

Mountain Run would emphasize cost-plus pricing because it is a price-setter. Mountain Run would beconsidered a price-setter because the resort has a favorable reputation and, therefore, some controlover lift ticket prices. Current variable cost Fixed costs Full product cost Desired profit Target revenue Divided by number of guests Cost plus price per guest $ 8,700,000.00 =725000 guests*12 per guest $ 33,000,000.00 $ 41,700,000.00 $ 25,725,000.00 =183750000 assets *14% $ 67,425,000.00 725000 $ 93.00