Q:
Consider that SnowCastles' reputation has diminished and other resorts in the vicinity are changing only $60 per lift ticket. SnowCastles has become a price-taker and will not be able to charge more than its competitors. At the market price, SnowCastles' managers consider they will still serve 800,000 skiers and snowboarders each season.
1. If SnowCastles can not reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. May investors be happy with the profit level? Show your analysis.
2. Consider that SnowCastles has found ways to cut its fixed costs to $31 million. Evaluates its new target variable cost per skier/snowboarder? Compare this to the present variable cost per skier/ snowboarder.