Question

Ch 25-1

anting Homework: Chapter 25 HomeWUIR Score: 0 of 8 pts 1 of 5 (0 complete) HW Score: 0%, 0 of 36 pts S25-2 (similar to) Question Help Skiable Acres operates a Rocky Mountain ski resort The company is planning is a ticket pricing for the coming ski season Investors would like to earn a 12 return on investment on the company's $111.000.000 of assets. The company primanly incurs fixed costs to groom the runs and operate the lifts Skiable Acres projects foxed 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 $13 per guest Currently the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices Read the reguitements Requirement 1. Would Skiable Acres emphasize target pricing or cost-plus pnang? Why? Skable Acres should emphasize a approach to pncing because it has been able to differentiate its ski resort from others in the area Because of its good reputation managers will have control over pricing Of course, they still need to consider whether the nee is within the range customers are willing to pay ar to ( o) Click to select your answer(s) and then click Check Answer 2 parts NA

Answer 1

1. Skiable Acres should emphasize a target approach to pricing because it has been able to differentiate its ski resort from others in the area. Because of its good reputation, managers will have some control over pricing. Of course, they still need to consider whether the target price is within the range customers are willing to pay.

2. Return on investment = 12% on assets

= 12% of $111,000,000

= $13,320,000

Fixed costs = $37,000,000

Variable costs = 6,80,000 guests @ $13 per guest

= $8,840,000

Variable costs	$8,840,000
Add : Fixed costs	$37,000,000
Total costs	$45,840,000
Add : Target return	$13,320,000
Total price	$59,160,000
÷ No. of skiers	680,000
Target price	$87

In the given case, the entity is more of a price maker rather than a price taker. Target pricing takes into consideration the customer expectations and aims at delivering more value to the customers. So, even when the competitors are charging $84 per day, as per the target pricing approach, Ski Acres' price shall be $87 per day.