Mount Snow 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 16% return on investment on the company’s $ 109,375,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. Mount Snow projects fixed costs to be $ 35,000,000 for the ski season. The resort serves about 700,000 skiers and snowboarders each season. Variable costs are about $ 12 per guest. Currently, the resort has such a favorable reputation among skiers and ­snowboarders that it has some control over the lift ticket prices.

Requirements

1. Would Mount Snow emphasize target pricing or cost- plus pricing. Why?

2. If other resorts in the area charge $ 83 per day, what price should Mount Snow charge?