Links Golf Course is planning for the coming golfing season.Investors would like to earn a 10% 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 $32,000,000 for the season.About 600,000 rounds of golf are expected to be played each year.Variable costs are about $15 per round of golf.Links Golf Course is a price-taker and will not be able to charge more than its competitors,who charge $75 per round of golf.Compute the operating profit that will be earned.

Question

Quizplus · Accepted Answer

Operating 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 the sum of fixed costs ($32,000,000) and variable costs ($15 per round times 600,000 rounds, which equals $9,000,000), totaling $41,000,000. Therefore, the operating profit is $45,000,000 - $41,000,000 = $4,000,000.

Links Golf Course Is Planning for the Coming Golfing Season