Venture Camps, Inc., leases the land on which it builds camp sites. Venture is c

Question

Venture Camps, Inc., leases the land on which it builds camp sites. Venture is considering opening a new site on land that requires $4,500 of rental payment per month. The variable cost of providing service is expected to be $8 per camper. The following chart shows the number of campers Venture expects for the first year of operation of the new site:

Assuming that Venture wants to earn $9 per camper, determine the price it should charge for a camp site in February and August.

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total 330 350 360 380 640 620 760 770 460 490 410 430 6,000

Explanation / Answer

(Kindly note all amounts in $) Month No. of Price per Variable Gross Rental Net campers camper Cost per Margin per month Margin camper per camper per camper February 350         29.86 8             21.86 4500 9 August 770         22.84 8             14.84 4500 9 Gross Margin per camper is calculated using the formula ((Net Margin per camper X No. of campers) + Rentals per month) / No. of campers Price per camper = Gross Margin per camper + Variable cost per camper

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