6) Mountaintop golf course is planning for the coming season. Investors would li

Question

6) Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $50 million of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25,000,000 for the golfing season. About 400,000 golfers are expected each year. Variable costs are about $8 per golfer. The 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 golf? (5 points) 7) Jim Bean Company has three product lines: D, E, and F. The following information is available Sales revenue Variable expenses Contribution margin Fixed expenses Operating income (loss) 80,000 $42,000 40.000 $21,000 40,000$21,000 12.000$15.000 $6,000 $20,000 $12.000 $ 8,000 S 28,000 $(9,000) Jim Bean Company is thinking of discontinuing product line F because it is reporting an operating loss All fixed costs are unavoidable. Assuming Jim Bean Company discontinues line Fand is able to double the production and sales of product line E without increasing fixed costs. What affect will this have on operating income? 8) The Nut House sells almonds, cashews, and pistachios. They sold 10,000 cans last year. Pistachios outsold cashews by a margin of 2 to 1 in cans. Sales of almonds were half the sales of cashews in cans. Fixed costs for the Nut House are $20,000 and additional information follows Unit Variabl Cost $4.00 $5.0 $4.0 Unit Sales Pri Product 5Almonds Cashews 2 |Pistachios $8 10. $6.00 What is the breakeven sales volume and dollars for each nut (rounded)? (10 points)

Explanation / Answer

Answer of 6:

Annual Return on Assets = Assets *12%
Annual Return on Assets = $50,000,000*12%
Annual Return on Assets = $6,000,000

Let the price charge for a round of golf be X

Fixed Assets + Variable Cost + Return on Assets = Price Charge
$25,000,000 + (400,000*$8) + $6,000,000 = 400,000*X
$25,000,000 + $3,200,000 + $6,000,000 = 400,000X
$11,700,000 = 400,000X
X = $11,700,000 / 400,000
X= $29.25 per round

The price charge for round for golf is $29.25

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