rounds of goif are expected to be played each year Variable

rounds of goif are expected to be played each year Variable costs are about $10 per round of golt The Bur Hill golt course has a favorable reputation in the area and thereore, has some control over the price of a round of golf. Using a cost- plus approach, what price shouid Bur Hill charge for a round of goir D. $70

Solution

Required Annual Retun on Asset = 50,000,000 x 10% = $5,000,000 Let X be the Price charged per round of golf Total revenue for Lac round of golf will be 500000X Now, at targeted profit, total cost plus targeted profit should be equal to the revenue fixed Cost + Variable Cost + Target Profit = Sales Revenue 25,000,000 + (500,000 x 10) + 5,000,000 = 500,000x 35,000,000 = 5,00,000X X = 35,000,000/5,00,000 Sales Price (X) per Golf round will be $70 ANSWER IS (D)