Mount Snow 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 17% return on the company's $115 million of assets. The company incurs primarily fixed costs to groom the runs and operate the lifts. Mount Snow projects fixed costd to be $44,000,000 for the ski season. The resort serves about 775,000 skiers and snowboarders each season. Variable cost are $7 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that its has some control over the lift ticket prices.

1. Would Mount Snow emphasize target costing or cost-plus pricing. Why?

2. If other resorts in the area charge $66 per day, what price should Mount Snow charge?

1, Fill in the Blank by choosing the correct answer.

Mount Snow should emphasize a cost plus/ target approach to pricing because it has been able to differentiate its ski resort from others in the area. Because of its favorable reputation, managers will have no / some control over pricing. Of course, they still need to consider whether the cost plus/ target price is within the range customers are willing to pay.

2. If other resorts in the area charge $66 per day, what price should Mount Snow charge?

Complete the following table to calculate the price Mount Snow should charge. (Round your answer to the nearest cent.)

_____________________________________ _______________ words to choose from for each line: Desired Profit, Fixed Costs, Number of skiers/snowboarders, target revenue, total costs, total variable costs

Plus: _________________________________ _______________

______________________________________ _______________

Plus: __________________________________ _______________

Target Revenue _______________

Divided by: _____________________________ _______________

Price per lift ticket _______________

If other resorts in the area charge $66 per day, what price should Mount Snow charge?

The price is $_____ above/below competing ski resorts in the area. Given Mount Snow reputation they should be able to charge $______ a day without affecting their volume.