(L.OBJ. 2) Making special order and pricing decisions [10 min]
SnowDelight operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to earn a 13% return on the company’s $105 million of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. SnowDelight projects fixed costs to be $34,250,000 for the ski season. The resort serves about 650,000 skiers and snow- boarders each season. Variable costs are about $11 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices.
Requirements
1. Would SnowDelight emphasize target pricing or cost-plus pricing. Why?
2. If other resorts in the area charge $82 per day, what price should SnowDelight charge?
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