Willow 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. Willow golf course is a price-taker and will not be able to charge more than its competitors, who charge $78 per round of golf. Compute the operating profit that will be earned.
A) $5,800,000
B) $6,000,000
C) $87,800,000
D) $46,800,000
A .A)
Revenue at market price (600,000 x $78 ) $46,800,000
Less: Total cost [$32,000,000 + (600,000 x $15 )] 41,000,000
Operating profit $5,800,000
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