S8-2Determine pricing approach and target price (Learning Objective2)

Winter Sports Inc. 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. Winter Sports projects fixed costs to be $33,750,000 for the ski season. The resort serves 750,000 skiers and snowboarders each season. Variable costs are $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 Winter Sports emphasize target costing or cost-plus pricing. Why?
2. If other resorts in the area charge $65 per day, what price should Winter Sports charge?