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 17% return on the company’s $ 115 million of assets. The company incurs primarily fixed costs to groom the runs and operate the lifts. Mount Snow projects fixed costs to be $ 44,000,000 for the ski season. The resort serves 775,000 skiers and snowboarders each season. Variable costs are $ 7 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices.
1. Would Mount Snow emphasize target costing or cost- plus pricing. Why?
2. If other resorts in the area charge $ 66 per day, what price should Mount Snow charge?