Comprehensive pricing analysis The Par-More executive golf course is located in a prime recreational location in Florida. It contains three short 18-hole golf courses which attract a good flow of customers most of the year. In addition to offering a quality facility, management awards free soft drinks and other small prizes for a hole-in-one or posting very low scores. The current price for a round of golf is $8. The variable cost of operating the facility during 1992 was $1.50 a round. Fixed cost for the year was $1,950,000. Net income for 1992 was $650,000 on sales of $3,200,000. Significant increases in both fixed and variable costs have eroded Par-More's income over the last several years. In fact, management expects a 20 percent increase in both fixed and variable costs in 1993.

To offset the impact of the cost increases, management is contemplating a price increase of $2 a round for golf.

REQUIRED a. Compute the number of rounds of golf sold in 1992. b. If the price is not increased in 1993, what is the expected net income assuming the same volume of activity as 1992? c. Compute the price indifference point for the new price for a round of golf. d. Compute the break-even level for 1992. e. Compute the break-even point for 1993 (1) with the price increase and (2) without the price increase. f. If the price increase will decrease the number of rounds of golf sold by 20 percent, should it be implemented? g. Compute the required level of activity in 1993 to achieve the 1992 net income assuming the price increase.