Question

SnowCastle 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 10 % return on investment on the? company's $260,900,000of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. SnowCastle projects fixed costs to be $30,000,000for the ski season. The resort serves about 710,000 skiers and snowboarders each season. Variable costs are about $ 9 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 SnowCastle emphasize target pricing or? cost-plus pricing?? Why?
2.	If other resorts in the area charge $83 per? day, what price should SnowCastle ?charge?

Answer 1

1. Target pricing is practiced by price taking companies. Products are not unique in this market segtion and competiton is very huge. Therefore individual companies donot have much control over the pricicng of the product.

Cost-plus pricing on the other hand is applicable to price setting companies. These companies manufacture unique products due to which they have good brand recongnition. They have control over pricing. Cost – plus pricing is “a method to manage costs and profits by determining the price.

2.