Question

Mountaintop golf course is planning for the coming season. Investors would like to earn a​ 12% return on the​ company's $ 47 comma 000 comma 000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $ 24 comma 000 comma 000 for the golfing season. About 410 comma 000 golfers are expected each year. Variable costs are about $ 17 per golfer. Mountaintop golf course has a favorable reputation in the area and​ therefore, has some control over the price of a round of golf. Using a costminusplus ​approach, what price should Mountaintop charge for a round of​ golf?

Answer 1

The Mountaintop should charge a price of $90.1 for a round of​ golf.

Step-by-step explanation:

Return required per golfer = (47000000*12%)/400000

= $14.1

Price to be charged = 14.1 + 16 + (24000000/400000)

= $90.1

Therefore, The Mountaintop should charge a price of $90.1 for a round of​ golf.