Mountaintop golf course is planning for the coming season. Investors would like

Question

Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $46,000,000 Fixed costs are projected to be $20,000,000 for the golfing season. About 410,000 golfers are expected each y Variable costs therefore, has some control over the price of a round of golf. Using a cost - plus approach, what pr Mountaintop charge for a round of golf? of assets. The company primarily incurs fixed costs to groom the greens and fairways. are about $18 per golfer. Mountaintop golf course has a favorable reputation in the area and OA. $6678 O B. $18.00 O C. $125.66 O D. $80.24

Explanation / Answer

Answer 1 Calculation of price that Mountaintop charge for a round of golf Expected earnings for the season = $46000000*12% = $5,520,000.00 Add : Projected Fixed cost $20,000,000.00 Total Contribution Margin required $25,520,000.00 Add : Variable cost (410000 golfers * $18 per golfer) $7,380,000.00 Projected Sales Revenue $32,900,000.00 / No.of Golfers expected 410000 Price for a round of golf $80.24 The answer is Option D. Answer 2 Calculation of profit to be earned for the Golf season Sales Revenue = 410000 golfers * $88 per round of golf = $36,080,000.00 less : Variable cost = 410000 golfers * $19 per golfer = $7,790,000.00 Contribution Margin $28,290,000.00 Less : Fixed cost $22,000,000.00 Profit to be earned $6,290,000.00 The answer is Option D. Answer 3 The answer is Option C. When the extra revenue from processing further is more than the extra cost of processing further , the best decision would be to process further.

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