Hilltop Golf Course is planning for the coming golfing season. Investors would like to earn a

15 %

return on the company's

$60,000,000

of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be

$30,000,000

for the season. About

500,000

rounds of golf are expected to be played each year. Variable costs are about

$16

per round of golf. Hilltop golf course has a favorable reputation in the area and, therefore, has some control over the sales price of a round of golf. Using a cost-plus pricing approach, what sales price should Hilltop charge for a round of golf to achieve the desired profit? (Round your answer to the nearest dollar.)

A.

$76

B.

$94

C.

$60

D.

$44

#2

Mickey Tire Company makes a special kind of racing tire. Variable costs are $221 per unit, and fixed costs are $30,000 per month. Mickey sells 500 units per month at a sales price of $310. If the quality of the tire is upgraded, the company believes it can increase the sales price to $349. If so, the variable cost will increase to $230 per unit, and the fixed costs will rise by 50%. If Mickey decides to upgrade, how will operating income be affected?

A.

Operating income will decrease by $15,000.

B.

Operating income will decrease by $4,500.

C.

Operating income will increase by $4,500.

D.

Operating income will remain the same