Identifying relevant issues for cost averaging Cliff Corporation, offers mountain-climbing expedi

Identifying relevant issues for cost averaging Cliff Corporation, offers mountain-climbing expeditions for its customers, providing food, equipment, and guides. Climbs normally require one week to complete. The company’s accountant is reviewing historical cost data to establish a pricing strategy for the coming year. The accountant has prepared the following table showing cost data for the most recent climb, the company’s average cost per year, and the five-year average cost.

Span of Time 

Recent Climb

One Year

Five Years

Total cost of climbs (a)

$8,000

$506,540

$1,550,000

Number of climbers (b)

10

620

2,500

Cost per climber (a  b)

$800

$817

$620

Required

Write a memo that explains the potential advantages and disadvantages of using each of the per unit cost figures as a basis for establishing a price to charge climbers during the coming year. What other factors must be considered in developing a pricing strategy?

 

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