SnowCastles 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 14% return on the company's $100 million of assets. The company incurs primarily fixed costs to groom the runs and operate the lifts. SnowCastles projects fixed costs to be $34,000,000 for the ski season. The resort serves about 800,000 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.
1. Would SnowCastles emphasize target costing or cost-plus pricing? Why?
2. If other resorts in the area charge $60 per day, what price should SnowCastles charge?