Mount Snow operates a Rocky Mountain ski resort. The company is planning its lif

Question

Mount Snow operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to eam a 14% return on investment on the company's $183,750,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. 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 $8 per guest. Currently the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices. Read the requirements Requirement 1. Would Mount Snow emphasize target pricing or cost-plus pricing? Why? Mount Snow should emphasize a approach to pricing because it has been able to differentiate its ski resort from others in the area. Because of its good | price is within the range customers are willing reputation, managers will have to pay.

Explanation / Answer

ans)

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.

2)

Current variable costs($8 per guest × 725000 guests) 5,800,000

Plus: Fixed costs 33,000,000

Full product cost 38,800,000

Plus: Desired profit(14% × $183,750,000 assets) 25725000

Target revenue$ 64525000

Divided by number of guests 725000

Cost-plus price per guest 89

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.