Learning Materials
Features
Discover
Chapter 25: 9RQ (page 1406)
Explain the difference between price-takers and price-setters.
Price-takers are the companies who accept the prices as permarket competition. In contrast, price-setters are companies that control the price setting of theirproducts and services.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
What is outsourcing?
When is nonfinancial information relevant?
Skiable Acres operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to earn a 10% return on investment on the company’s \(270,000,000 of assets. The company primarily incurs fixed costs to groom the runs and operate the lifts. Skiable Acres projects fixed costs to be \)31,000,000 for the ski season. The resort serves about 725,000 skiers and snowboarders each season. Variable costs are about \(8 per guest. Currently, the resort has such a favorable reputation among skiers and snowboarders that it has some control over the lift ticket prices.
Requirements
1. Would Skiable Acres emphasize target pricing or cost-plus pricing? Why?
2. If other resorts in the area charge \)85 per day, what price should Skiable Acres charge?
What are joint costs? How do they affect the sell or process further decision?
Nautical manufactures flotation vests in Tampa, Florida. Nautical’s contribution margin income statement for the month ended December 31, 2018, contains the following data:
NAUTICAL
Income Statement
For the Month Ended December 31, 2018
Sales in Units 29,000
Net Sales Revenue \(551,000
Variable Costs:
Manufacturing 116,000
Selling and Administrative 111,000
Total Variable Costs 227,000
Contribution Margin 324,000
Fixed Costs:
Manufacturing 123,000
Selling and Administrative 92,000
Total Fixed Expenses 215,000
Operating Income \)109,000
Suppose Water Works wishes to buy 4,800 vests from Nautical. Nautical will not incur any variable selling and administrative expenses on the special order. The Nautical plant has enough unused capacity to manufacture the additional vests. Water Works has offered \(15 per vest, which is below the normal sales price of \)19.
Requirements
1. Identify each cost in the income statement as either relevant or irrelevant to Nautical’s decision.
2. Prepare a differential analysis to determine whether Nautical should accept this special sales order.
3. Identify long-term factors Nautical should consider in deciding whether to accept the special sales order.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App