Burr Hill golf course is planning for the coming season. Investors would like to earn a 10% return on the company's $50,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25,000,000 for the golfing season. About 500,000 rounds of golf are expected to be played each year. Variable costs are about $10 per round of golf.
-The Burr Hill golf course has a favorable reputation in the area and therefore, has some control over the price of a round of golf. Using a cost-plus approach, what price should Burr Hill charge for a round of golf?

Question

Burr Hill golf course is planning for the coming season. Investors would like to earn a 10% return on the company's $50,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25,000,000 for the golfing season. About 500,000 rounds of golf are expected to be played each year. Variable costs are about $10 per round of golf. 
-The Burr Hill golf course has a favorable reputation in the area and therefore, has some control over the price of a round of golf. Using a cost-plus approach, what price should Burr Hill charge for a round of golf?

Quizplus · Accepted Answer

C) Calculations:
$50,000,000 × 10% = $5,000,000
500,000 × $10 = $5,000,000
$5,000,000 + $25,000,000 + $5,000,000 = $35,000,000
$35,000,000/500,000 = $70

Burr Hill Golf Course Is Planning for the Coming Season