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 16% return on the company’s $109,375,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. Mount Snow projects fixed costs to be $35,000,000 for the ski season. The resort serves about 700,000 skiers and snowboarders each season. Variable costs are about $12 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices.
Requirements
1. Would Mount Snow emphasize target pricing or cost plus pricing. Why?
2. If other resorts in the area charge $83 per day, what price should Mount Snow charge?
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