This Question: 1 pt 8 of 14 (7 complete) Oe Mountaintop golf course is planning

Question

This Question: 1 pt 8 of 14 (7 complete) Oe Mountaintop golf course is planning for the coming season incurs foxed costs to groom the greens and fairways. Fixed costs Variable costs are about $15 Using a cost- plus approach, what price should Mountaintop charge for a round of gol? Investors would like to eam a 12% return on the company's $45,000,000 of assets The company primarily are projected to be 521.000000 for the golfing season About 400.000 golfers are expected each year per golfer Mountaintop golf course has a favorable roputation in the area and therefore has some control over the price of a round of golf O A. $67.5 B. $125 OC. $15 O D. $81 Click to select your answer

Explanation / Answer

Solution: $81

Working:

Variable costs per unit $15.00
Expected volume 400,000
Total variable costs: 400,000 * $15= $6,000,000

Investors' return (% of assets) 12%
Total assets $45,000,000
Desired profit: $45,000,000 * 12% = $5,400,000

Total fixed costs $21,000,000
Total variable costs $6,000,000
Total costs $21,000,000 + $6,000,000 = $27,000,000

Desired profit $5,400,000
Target revenue $32,400,000

Expected volume 400,000

Cost-plus price per round of golf : $32,400,000 / 400,000 = 81

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