Skiable Acres 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 10% return on investment on the company's $270,000,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. Skiable Acres projects fixed costs to be $31,000,000 for the ski season. The resort serves about 725,000 skiers and snowboarders each season. Variable costs are about $8 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 Skiable Acres emphasize target pricing or cost-plus pricing? Why?
2. If other resorts in the area charge $85 per day, what price should Skiable Acres charge?