(L.OBJ. 2) Making special order and pricing decisions [10 min] Consider SnowDelight fro...

(L.OBJ. 2) Making special order and pricing decisions [10 min]

Consider SnowDelight from Short Exercise 19-2. Assume that SnowDelight’s reputation has diminished and other resorts in the vicinity are only charging $75 per lift ticket. SnowDelight has become a price-taker and will nor he able to charge more than its competitors. At the market price, SnowDelight- managers believe they will still serve 650,000 skiers and snowboarders each season.

Requirements

1. If SnowDelight cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level?

2. Assume SnowDelight has found ways to cut its fixed costs to $28 million. What is its new target variable cost per skier/snowboarder?