$49,000,000 of assets. The company primarily incurs fixed costs to groom the gre
ID: 2597651 • Letter: #
Question
$49,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $20,000,000 for the golfing season. About 430,000 golfers are expected each year. Variable costs are golf? about $19 per golfer. Mountaintop golf course has a favorable reputation in the area and therefore, has some control over the price of a round of golf. Using a cost plus approach, what price should Mountaintop charge for a round of OA. $127.63 O B. $79.19 OC. $65.51 O D. $19.00Explanation / Answer
Answer:
Charge for the round of golf=$79.19
Explanation to the answer:
Total variable cost
= Golfer* variable cost
430,000*19=8,170,000
Required return
49,000,000*12%=5,880,000
Total fixed and variable cost
=20,000,000+8,170,000
=28,170,000
Total cost
=28,170,000+5,880,000
=34,050,000
Charge for the round of golf
=34,050,000/430,000
=$79.19
Charge for the round of golf=$79.19
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