Investors would like to earn a 12% return on investment on the company's $111,000,000 of assets. Skiable Acres projects fixed costs to be $37,000,000 for the ski season. The resort serves about 680,000 skiers and snowboarders each season. Variable costs are about $9 per guest. Last year, due to its favorable reputation, Skiable Acres was a price-setter and was able to charge $5 more per lift ticket than its competitors without a reduction in the number of customers it received. Assume that Skiable Acres's reputation has diminished and other resorts in the vicinity are charging only $78 per lift ticket. Skiable Acres has become a price-taker and will not be able to charge more than its competitors. At the market price, Skiable Acres managers believe they will still serve 680,000 skiers and snowboarders each season.

Requirements

1.	If Skiable Acres cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level?
2.	Assume Skiable Acres has found ways to cut its fixed costs to $34,000,000. What is its new target variable cost per skier/snowboarder?

Requirement 1.If

Skiable Acres

cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level?

Complete the following table to calculate Skiable Acres's projected income.

Revenue at market price
Less: Total costs
Operating income