S25-2 Making pricing decisions Learning obj Skiable Acres operates a Rocky Mountain ski resort. The company is planning its lift cket pricing for the coming ski season. Investors would like to earn a 10% return on investment on the company's $270,000,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. Skiable Acres projects fixed costs to be $31,000,000 for the ski season. The resort serves about 725,000 skiers and snow- boarders each season. Variable costs are about $8 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices. Requirements 1. Would Skiable Acres emphasize target pricing or cost-plus pricing? Why? 2. If other resorts in the area charge $85 per day, what price should Skiable Acres charge? Nota Short Exercise S25-2 must be completed before attempting Short Exercise S25-3. S25-3 Making pricing decisions Learning Obje fer to details about Skiable Acres from Short Exercise S25-2. Assume that Ski- able Acres's reputation has diminished and other resorts in the vicinity are charging only $85 per lift ticket. Skiable Acres has become a price-taker and will not be able to charge more than its competitors. At the market price, Skiable Acres managers believe they will still serve 725,000 skiers and snowboarders each season Requirements 1. If Skiable Acres cannot reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? 2. Assume Skiable Acres has found ways to cut its fixed costs to $30,000,000. What is its new target variable cost per skier/snowboarder