1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
marissa [1.9K]
3 years ago
10

Mount Snow Inc. operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season.

Investors would like to earn a 15% return on the company's $115 million of assets. The company incurs primarily fixed costs to groom the runs and operate the lifts. Mount Snow projects fixed costs to be $43,500,000 for the ski season. The resort serves 900,000 skiers and snowboarders each season. Variable costs are $10 per guest. The resort had such a favorable reputation among skiers and snowboarders that it had some control over the lift ticket prices. Assume that Mount Snow's reputation has diminished and other resorts in the vicinity are charging only $66 per lift ticket. Mount Snow has become a price-taker and won't be able to charge more than its competitors. At the market price, Mount Snow's managers believe they will still serve 900,000 skiers and snowboarders each season.
Requried:
a. Would Mount Snow emphasize target costing or cost-plus pricing. Why?
b. If other resorts in the area charge $66 per day, what price should Mount Snow charge?
Business
1 answer:
Ray Of Light [21]3 years ago
8 0

Answer:

Mount Snow Inc.

a. Mount Snow would emphasize cost-plus pricing and not target costing.  The target costing considered the investors expected returns on investment.  Based on the target returns, customers were then charged any fee to meet the target profit, including all other costs.  Now that Mount Snow is a price-taker, it cannot meet the target returns.  It can only work with the cost-plus pricing strategy in order to rein in its costs.

b. As a price-taker, Mount Snow cannot charge more than $66.  It should charge $66.

Explanation:

a) Data and Calculations:

Investors expected return on investment = 15%

Cost of investment = $115,000,000

Ski Season's Fixed costs = $43,500,000

No of skiers and snowboarders served = 900,000

Variable costs per guest = $10

Charges by other resorts in the vicinity = $66 per lift ticket

Total expected revenue              $59,400,000 ($66 * 900,000)

Total variable costs =  $9,000,000

Fixed costs =               43,500,000

Total costs =                                 $52,500,000

Profit =                                            $6,900,000

Target profit =                               $17,250,000 ($115,000,000 * 15%)

You might be interested in
Suppose a bank enters a repurchase agreement in which it agrees to buy Treasury securities from a correspondent bank at a price
Cloud [144]

Answer:

Yield with 6-day maturity is 7.70%

Yield with 18-day maturity is 2.57%

Explanation:

The formula for yield on repurchase is given as:

y = ( PAR – P ) / P x (360 / t )

P=Purchase price

PAR=Repurchase price

t= number of days of the transaction

In first scenario,PAR is $39 million,P is $38.95 million and t=6

y=($39000000-38950000)/38950000*(360/6)

y=7.70%

In the second scenario,details remained the same except for t that is 18

y=($39000000-38950000)/38950000*(360/18)

y=2.57%

This implies the longer the maturity the lesser the yield since yield is computed on daily basis.

3 0
3 years ago
a face value of $450 million. The bonds pay interest each March 31 and September 30, beginning March 31, 2022. The effective int
Vitek1552 [10]

Answer:

$7,776,899

Explanation:

Calculation to determine what interest expense would it recognize in its 2021 income statement

Interest expense= $388,844,955 * 8% * (3 months/12 months)

Interest expense= $31,107,596.4 * 3/12

Interest expense= $7,776,899

Therefore the interest expense that would be recognize in its 2021 income statement is $7,776,899

7 0
3 years ago
A proposed new project has projected sales of $159,800, costs of $80,840, and depreciation of $5,640. The tax rate is 24 percent
never [62]

Answer:

Explanation:

In order to calculate the OCF, we first need to calculate net income.

We have:

Sales: $159,800

  • Cost:  -$80,840
  • Depreciation  $5,640

EBT : $73,320

  • Tax = $73,320*24% = $17,596.8

Net income : $55,723.2

Using the most common financial calculation for OCF, we get:

OCF = EBIT + Depreciation - Taxes

OCF = $73,320 + $5,640 - $17,596.8

OCF = $61,363.2

The top-down approach to calculating OCF yields:

OCF = Sales - Costs - Taxes

OCF = $159,800 - $80,840 - $17,596.8

OCF = $61,363.2

The tax-shield approach is:

OCF = (Sales - Costs)(1 - tC) + tCDepreciation

OCF = ($159,800 - $80,840)(1 - 0.24) + 0.24*$5,640

OCF =$61,363.2

And the bottom-up approach is:

OCF = Net income + Depreciation

OCF = $55,723.2 +$5,640

OCF = $61,363.2

Hope it will find you well

3 0
3 years ago
How can tech companies increase goodwill and indirectly affect profits for parent companies?
Troyanec [42]

Answer:

The only way goodwill can be increased is through the acquisition of another company as a subsidiary. Assume a business acquires a subsidiary for a price that exceeds the total value of the subsidiary's assets.

Explanation:

3 0
3 years ago
In the letter to titus where is titus said to be ministering
steposvetlana [31]
He is said to be ministering in Crete
8 0
3 years ago
Other questions:
  • The database of Aster Corp. was hacked and confidential data was leaked to its competitors. This resulted in a huge financial lo
    14·1 answer
  • The "market clearing price" is most closely associated with
    8·2 answers
  • A company is considered large if it
    6·1 answer
  • "______ accounting uses adjusting entries to reflect economic reality even when there is _______ involved in the transaction. Th
    8·1 answer
  • Pioneer Chicken advertises "lite" chicken with 30% fewer calories than standard chicken. When the process for "lite" chicken bre
    9·1 answer
  • Employers prefer to review a___ resume when the history is the most important consideration. A) targeted b) combination c) chron
    8·1 answer
  • Prepare the journal entry to record bad debt expense assuming Novak Company estimates bad debts at (a) 4% of accounts receivable
    9·1 answer
  • An article in the New York Times about J.C.​ Penney's pricing strategy under former CEO Ron Johnson​ observes: ​"Penney had pull
    5·1 answer
  • What are some frustrations that may arise while working with the human-centered design thinking
    12·1 answer
  • I'll just give you the points lol
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!