Philadelphia Swim Club is planning for the coming year. Investors would like to
ID: 2514512 • Letter: P
Question
Philadelphia Swim Club is planning for the coming year. Investors would like to earn a 10% return on the company's $39,000,000 of assets. The company primarily incurs fixed costs to maintain the swimming pool. Fixed costs are projected to be $12,700,000 for the year. About 550,000 members are expected to swim each year. Variable costs are about $13.00 per swimmer. The Philadelphia Swim Club has a favorable reputation itn the area and therefore, has some control over the membership price. Using a cost-plus approach, what price should Philadelphia Swim Club charge for a membership? O A. $29.00 O B. $43.18 O C. $36.09 O D. $7.09Explanation / Answer
Question 1 -
Price should swim club charge = $ 43.18
Variable costs per unit
$ 13
Expected volume
5,50,000
Total variable costs
$71,50,000
Investors' return (% of assets)
10%
Total assets
$3,90,00,000
Desired profit
$ 39,00,000
Total fixed costs
$1,27,00,000
Total variable costs
$71,50,000
Total costs
$1,98,50,000
Desired profit
$ 39,00,000
Target revenue
$2,37,50,000
Divide by
Divide by
Expected volume
550,000
Price should swim club charge
$ 43.18
Question 2 -
Contribution margin per machine hour for food processors = Sales price - Variable cost
= $165 - $90
= $75
Variable costs per unit
$ 13
Expected volume
5,50,000
Total variable costs
$71,50,000
Investors' return (% of assets)
10%
Total assets
$3,90,00,000
Desired profit
$ 39,00,000
Total fixed costs
$1,27,00,000
Total variable costs
$71,50,000
Total costs
$1,98,50,000
Desired profit
$ 39,00,000
Target revenue
$2,37,50,000
Divide by
Divide by
Expected volume
550,000
Price should swim club charge
$ 43.18