Question

Mountain Camps, Inc. leases the land on which it builds camp sites. Mountain is considering opening a new site on land that requires $2,500 of rental payment per month. The variable cost of providing service is expected to be $6 per camper. The following chart shows the number of campers Mountain expects for the first year of operation of the new site:

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total

120 250 200 200 300 500 650 650 350 380 100 300 4,000

Required

Assuming that Mountain wants to earn $5.50 per camper, determine the price it should charge for a camp site in February and August. (Do not round intermediate calculations.)

Answer 1

Mountain Camps, Inc. should charge $21.50 per camper in February and approximately $15.88 per camper in August to cover their costs and desired profit.

Step-by-step explanation:

In order to determine the price Mountain Camps, Inc. should charge for a campsite in February and August, we first need to take into account the total overhead costs, the variable costs per camper, and the profit margin they hope to achieve. In this case, the monthly overhead costs are $2,500 for land rental. The variable cost per camper is $6. Lastly, the company wants to earn a profit of $5.50 per camper. Therefore, the price per campsite would need to cover all these costs.

So, for February, the calculation is: ($2,500 (monthly lease) + $6 * 250 campers (variable costs)) / 250 campers = $16 per camper + $5.50 (desired profit) = $21.50. Therefore, the company should charge $21.50 per camper in February.

For August, the calculation is: ($2,500 (monthly lease) + $6 * 650 campers (variable costs)) / 650 campers = $10.38 per camper + $5.50 (desired profit) = $15.88. Therefore, the company should charge approximately $15.88 per camper in August.

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