Determine pricing approach and target price (Learning Objective 3)

SnowDreams 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 \(\$ 100\) million of assets. The company incurs primarily fixed costs to groom the runs and operate the lifts. SnowDreams projects fixed costs to be \(\$ 33,750,000\) for the ski season. The resort serves about 750,000 skiers and snowboarders each season. Variable costs are about \(\$ 10\) 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 SnowDreams emphasize target pricing or cost-plus pricing. Why?

2. If other resorts in the area charge \(\$ 70\) per day, what price should SnowDreams charge?