Snow Mount 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 20% return on the company's $110 million of assets. The company incurs primarily fixed costs to groom the runs and operate the lifts. Mount Snow projects fixed costs to be $38,200,000 for the ski season. The resort serves 875,000 skiers and snowboarders each season. Variable costs are $9 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 Mount Snow emphasize target costing or cost-plus pricing. Why?
2.	If other resorts in the area charge $58 per day, what price should Mount Snow charge?

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Part 1

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

Mount Snow should emphasize a cost-plus 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 some control over pricing. Of course, they still need to consider whether the cost-plus price is within the range customers are willing to pay.

Part 2

2. If other resorts in the area charge $58 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.)

Plus:

Plus:

Target revenue

Divided by:

Price per lift ticket

JUST NEED PART 2