Hilltop Golf Course is planning for the coming season. Investors would like to earn a 15% return on the company's $60,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $30,000,000 for the golfing season. About 600,000 rounds of golf are expected to be played each year. Variable costs are about $15 per round of golf. Hilltop golf course is a price-taker and will not be able to charge more than its competitors, who charge $75 per round of golf. What profit will it earn in terms of dollars?

Question

Quizplus · Accepted Answer

The profit is calculated as total revenue minus total costs. Total revenue is $75 per round times 600,000 rounds, which equals $45,000,000. Total costs are fixed costs of $30,000,000 plus variable costs of $15 per round times 600,000 rounds, which equals $9,000,000. Therefore, total costs are $39,000,000. The profit is $45,000,000 - $39,000,000 = $6,000,000.

Hilltop Golf Course Is Planning for the Coming Season