SnowCas e operates a Rocky Mountain sa resort. The company is planning its lift

Question

SnowCas e operates a Rocky Mountain sa resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to earn a 11 % return on investment on he company's $156,000,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. SnowCastle projects fixed costs to be $33,000,000 for the ski season. The resort serves about 660,000 skiers and snowboarders each season. Variable costs are about $10 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 SnowCastle emphasize target pricing or cost-plus pricing? Why? SnowCastle should emphasize a cost-plus approach to pricing because it has been able to differentiate its ski resort from others in the area. Because of its good reputation, managers will have some control over pricing. Of course, they still need to consider whether the cost-plus price is within the range customers are willing to pay. Requirement 2. If other resorts in the area charge $83 per day, what price should SnowCastle charge? Complete the following table to calculate the price SnowCastle should charge per lift ticket. Fixed costs Plus: Total variable costs Total costs Plus: Desired profit Target revenue Divided by Price per lift ticket Number of skiers / snowboarders Choose from any list or enter any number in the input fields and then click Check Answer

Explanation / Answer

Fixed costs $33,000,000 Plus: Total Variable costs (660,000 skiers @ $10 each) 6,600,000 Total costs 39,600,000 Plus: Desired Profit (11% of $156,000,000) 17,160,000 Target Revenue $56,760,000 Divided by: Number of skiers/snowboarders 660,000 Price per lift ticket $86

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