Nepal Corporation offers mountain-climbing expeditions for its customers, providing food, equipment, and guides. Climbs normally require one week to complete. The company's accountant is reviewing historical cost data to establish a pricing strategy for the coming year. The accountant has prepared the following table showing cost data for the most recent climb, the company's average cost per year, and the five-year average cost.
Span of Time
Recent Climb One Year Five Years
Total cost of climbs (a)..........................$6,000............$324,800...............$1,350,000
Number of climbers (b).........................10........................560.....................2,500
Cost per climber (a ÷ b)...........................$ 600................$ 580.....................$ 540
Required
Write a memo that explains the potential advantages and disadvantages of using each of the per-unit cost figures as a basis for establishing a price to charge climbers during the coming year. What other factors must be considered in developing a pricing strategy?