Links 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. links golf course is a price-taker and will not be able to charge more than its competitors, who charge $75 per round of golf. compute the operating profit that will be earned. select one: a. $6,000,000b. $46,800,000c. $87,800,000d. $5,800,000e. none of the above

Option (E) is correct.

Explanation:

Revenue at the competitor price:

= Rounds of golf are expected to be played each year × Charge per round

= 600,000 × $75 per round

= $45,000,000

variable Cost:

= Rounds of golf are expected to be played each year × Variable cost per round

= (600,000 × $15)

= $9,000,000

Contribution Margin:

= Revenue at the competitor price - variable Cost

= $45,000,000  - $9,000,000

= $36,000,000

Less: Fixed Costs = 32,000,000

Operating profit:

= Contribution Margin - Fixed Costs

= $36,000,000 - $32,000,000

= $4,000,000

So, the operating profit is $4,000,000.

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