Answer:
a. Would Mountain Point emphasize target pricing or cost-plus pricing? Why?
- They emphasize cost plus pricing because the investors are seeking a desired rate of return on their investment and they do it by adding the desired profit margin to their costs.
b. If other resorts in the area charge $66 per day, what price should Mount Snow charge?
- $75.50 in order for them to generate the required ROI. Since the resort has a very good reputation, it can charge a higher price than its competitors.
Explanation:
company's assets = $115,000,000
expected return on investment = 16%
fixed costs = $35,600,000
number of customers = 800,000
variable costs = $8 per customer x 800,000 = $6,400,000
total costs = $42,000,000
total cost per client = $42,000,000 / 800,000 = $52.50
desired profit = $115,000,000 x 16% = $18,400,000
desired profit per client = $18,400,000 / 800,000 = $23
price per ticket = $75.50
